Defense of meal expenses in a CRA tax audit
CRA does not like it when you claim meal expenses. If you have claimed any significant number of meal expenses, an auditor will tend to take the position that they are personal expenses and attempt to disallow most or even all of them.
Common tactics used by CRA during a tax audit
The following is a list of common tactics that CRA will use during an audit to disallow your meal expenses. Click each one to see a detailed analysis of the tactic along with the response you can make to defend yourself during an audit by CRA.
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CRA will demand an extensive list of details about each expenditure for food and beverages
CRA will demand an extensive list of details about each expenditure, including the name of the person you met with, the company they represented, their business address, the time of day the meal took place, and the business purpose of the meal, such as what project it related to or what was discussed.
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CRA will assert that a meal expense must produce income
CRA will tell you that meal expenses can be claimed only if you can show that you produced income as a result of the expenditure.
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CRA will try to argue that your meal expenses must have been personal if they did not take place during the "normal workday" (Mon-Fri, 9am-5pm).
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CRA will insist that meal expenses can only be claimed if they took place with customers
CRA will tell you that meal expenses can only be claimed if they are held specifically with current or potential customers and are not valid business expenses when held with anyone else.
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CRA will try to disallow meal expenses that took place with family members
CRA will attempt to classify your meal expenses as personal if they took place with family members with whom you happen to work.
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CRA will claim that your total meal expenses are “unreasonable” (aka: CRA will group all your meal expenses together, then only allow you a fraction of the total)
CRA will claim that either the total number of meal expenses or their total combined value is "unreasonable in the circumstances" based on the nature of your business activities, or your total income, or both, and are therefore being disallowed. CRA might also attempt to group all of your individual meal expenses into a single category expense, then allow you only an arbitrarily determined percentage of that total amount as a business expense.
Audit Self Defense is committed to making sure you never have to pay more to CRA than you are legally required to, and to making sure you have the tools you need to calmly and effectively deal with CRA if they come calling. Do we want you to win your case? Absolutely! However, Audit Self Defense cannot guarantee successful audit decisions. Nobody can guarantee that.
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