CC: Welcome to Taxology, the official podcast of the Canada Revenue Agency. I'm your host, CC. This episode is for the small business owners and self-employed out there. You probably wear multiple hats at work, like CEO, head of marketing, web developer or janitor, to name a few.

Did you know the CRA provides a free service that gives personalized support to small business owners and self-employed people just like you?

Through the CRA's Liaison Officer program, you can arrange an in-person or virtual visit with an officer who will help you with your tax obligations and help set you up for success. I know, I know. You don't want the CRA up in your books in fear of an audit. But here's the thing. The LO program is 100% confidential. Your information is never shared with other areas of the CRA, and isn't connected to an audit.

A CRA liaison officer can give you tips for keeping books and records, help you discover credits and deductions you may be eligible for, and, as we'll learn today, so much more!

On this episode we'll meet with Chantal, a CRA liaison officer, who will tell us what a typical meeting looks like, what help the CRA can provide, and how to schedule your very own visit!

After this episode, you can go to canada.ca/LOhelp for more information, or to schedule your visit.

Have we piqued your interest? If so, keep listening to find out all that the Liaison Officer program has to offer.

Thanks for coming today, Chantal.

Chantal: No problem!

CC: So, what is the Liaison Officer program, and how did it start and what is your role?

Chantal: So I've been with the CRA for 14 years and I did various different departments within the agency, but I've been with the LO program for 10 years. It was a pilot project when it first started for the first year. So from 2014 to 2015, in October, it became permanent.

So I’ve seen a little bit of that pilot project part and then when it became a current program, so I was there from the start. And, I maybe not knew as much when I was diving into or what it was exactly.

But now, with 10 years of experience of what I've seen from different businesses, like I enjoy learning and all the different types of businesses that we do have in Canada. And there's a lot of businesses that sometimes you wouldn't even imagine or think that is out there. But there's all different types.

And the main part I guess is to help these businesses being successful when it comes to their taxes, and when they're filing their taxes for their business.

CC: That’s really cool.

Chantal: So I guess your other question, which was what is a CRA liaison officer, and what we offer. So it's a free service. So when a business owner hears that they're very happy that they're having a free service. And we do personalized one-on-one visits with taxpayer/business owners.

And it's for self-employed individuals. So if they have a sole proprietor, or if they have an incorporated business, so they have a corporation. So we offer them to both. To be noted that at the beginning of the LO, we did not offer to corporations. That only started late 2019.

So we were only doing for self-employed individuals at first, but that's one of the things that grew with the LO service.

CC: So if you have a business of any size, you are eligible for a liaison officer visit.

Chantal: Yup! So they can go on the web site. And they can request to have a personalized visit, so a one-on-one with their liaison officer, there's even the option of requesting a seminar. So if it was for a group or like a certain business would want the service, we can have it in a group setting, which is a seminar. So there's those both options.

Even from, sometimes we have a seminar that will be booked and then the participants have the option of even from there, requesting A one-on-one visit if they want to because they want to specifically talk about their business. So yes. So to answer your question, it is for everyone.

CC: So if I have a small business and I'm looking for a liaison officer to help me, what can I expect from a visit or a session?

Chantal: So when I would get, first off a request from a taxpayer/business owner that would want the service, I do a little bit of research on the business, and kind of to tailor my visit to that type of business. And also when I first start with the business owner, I always ask them to describe and talk about their business to me. Because even though I've done my research, I want to hear it from them.

So, what a liaison officer does during the meeting after that, when they described their business and we had that open conversation, the whole point is to help that business with tips and best practices, especially for keeping good books and records. And we don't want them to have recurring issues that they may face because not keeping proper books and records. Which a lot of the times is what we see a lot.

So we always mention the shoe box. Especially with I guess self-employed individuals maybe, I feel I've seen it more. Is that they'll cram everything to this shoe box, and then when the time comes to file you have to go through all of that. So we want to give tips and show them maybe a proper way of, you know, having a software that helps you with your books and records. And everything will stay in order and up to date, and then they're not sitting there for hours or days when the time comes to file because they know that deadline is coming.

If they have something in place, it's going to be a lot easier when that time comes, and minimize those errors that they don't want to have. So I would say that's a big part. We talk about the differences between, you know, a self-employed individual will claim certain expenses a certain way, but then a corporation, that same expense type would be calculated differently.

And we sometimes have a lot of individuals that start as a sole proprietor, and then they decide to incorporate. So they need to adjust to that.

CC: I imagine that if I had a small business, I would be quite worried to invite the CRA into my business and have a look at my things. Should I be worried?

Chantal: No, absolutely not. Like a visit from a liaison officer is 100% confidential. So it's not going to result in a reassessment of us, you know, looking at your books.

And the information that you choose to discuss with us, it won't be shared with any other areas of the CRA or any other department. So you can have that confidence, I guess that it's not something that needs to be worried.

And we share that and saying like you know it won't be shared with other departments, so they know, because I'm not within the department of, let's say audit.

CC: Right.

Chantal: Because that will be the question like, “Am I going to be audited after this?”. No, we don't share that information.

CC: That's reassuring.

How long is each liaison officer visit?

Chantal: So when we book a visit with a business owner, every visit could be a different time, like some could be longer than others, some could be very short. When they book the visit, they're like, okay, how much, how much time do I need to like schedule for this? And I tell them like, you know it very depends. It depends how many questions you're going to have.

But we try to, when we schedule the visit in that time that they do have, that we'll be able to answer all their questions into that one visit.

We offer all our time to them, so it's really up to them. They'll say I only have one hour, I only have two hours. So we'll really try to like be able to give them a full extent of the service and answer all their questions.

Sometimes on a one off, I've seen that it could not be possible. Maybe they only have an hour and then we have to like rebook, maybe to do another hour, just because like really a time restraint that they don’t have. But for every visit to as well we do a follow up.

CC: Oh, okay.

Chantal: So, couple weeks after everything sets in, and it gives them a new open window of asking new questions, that they might have not thought of that question. But when after they realized, you know, oh, I should have asked this.

CC: Just let them digest the information and then ask any follow up questions.

Chantal: Yes.

CC: Is there a tool you provide to help businesses find and understand the benefits and credits they might be eligible for?

Chantal: So, there are different services that are offered as well online to assist the businesses with their tax obligation. There's so many different things. And within having like My Account, My Business Account, which is something I say like, with the CRA like, if you have a business like this is going to help you. Helps on the bookkeeping side of things.

And for them to keep track of things. You know, making their payments, and “What did I file?”, and “Did I do this filing?”, and “When is this due?”, and “I want to make installment payments,” like there's a long list of things which they have access to through My Business Account. You know, I need to change the address. I need to change the phone number. I need to change the bank information, like this is a lot of things that they can do on My Account and even My Business Account.

There is a tool which I’m asked a lot, and like you asked about benefits and credits, that businesses can use to search benefits and credits, and to make sure so they don't miss out on certain ones. And this tool is not only for CRA benefits and credits, but for other departments as well.

CC: Oh.

Chantal: It's a really cool tool because you describe, you know your business activity and things like that. What kind of benefits and credits you're looking for. So there's a list there. So it kind of gives an idea. Even them looking at it like, “Oh, well, this benefit or credit, I wasn't thinking about that one, but I should look into it.” and it will give you the information for all different departments, not just the CRA.

And again, that those business owners don't miss out on these benefits and credits that are out there that sometimes they just…

CC: Just don't know about them.

Chantal: They don't know, right?

CC: Yeah.

Chantal: And it's a question, like they want that help. Like they're looking for those benefits and credits. I feel every visit, I probably hear that question being asked, so it's a good tool to have.

CC: You were talking about that shoe box. What is the best way for small business owners or self-employed people to keep their records organized?

Chantal: The best way is to use a simple bookkeeping system that's going to work for them. I mentioned like there’s softwares out there, different ones that you can go and buy and get. And some are more things you would put in there for a type of business like maybe a bigger corporation, or you know some businesses that are service based. Like they don't have inventory, or they don't have like product that they sell.

CC: Right.

Chantal: So there's certain software that are maybe not meant for them really specifically, because there's a big part of that software that they won't use really.

With us, we show them simple things like simple things that are used every day. I feel sometimes like, you know, Microsoft Office programs and things like that, like we use a lot of those things, and they can create their own bookkeeping system. It's going to be tailored to what their needs are. So a bookkeeping system would be #1 to have everything kept in order.

Like I said, getting rid of that shoe box, and using that system where you're not sitting hours and days on end when you're ready to file. Everything is there for you, summaries are done. And you decide like, is it my business like required that every week I'm in there, you know updating? Is it monthly, Is it quarterly? Because some of them for self-employed individuals, who we I've seen a lot that their business is like a side gig.

CC: Oh yeah.

Chantal: You know, they some are like, I'm a full time employee and I do this on the side. So there's not as much updating for the books and records as often that they would need to, compared to someone that you know that is their full time job, and that's their business and they're full on into it. So it could be day-to-day update, more weekly I would say, for those type of businesses.

So that system is going to help make sure that everything lines up with your tax filings for, you know, GST and HST returns. If you have employees, you have payroll, making sure your remittances are in order, paid on time. So those are all things that would minimize the errors in those things that are important that you file, so your bookkeeping system is going to help for that.

Another helpful tip, which I said already that you would be updating on a regular basis and depending what the business flow is, but you schedule yourself regular reconciliation. So like I said, monthly or quarterly depending, just to stay up to date. And that's one big part that'd be important.

Reconciliation is one of the big ones that will help them save time and money. If they're doing that with their books and records. So bank statements, like making sure you're taking that time to go through them and doing that reconciliation because it's going to help you at the end of minimizing those errors and mistakes.

I remember I had met with a taxpayer and he did not separate for the bank accounts. So for business and personal, so everything was in one. And did not do reconciliation

And then there was an example of them selling a bike. Like their personal bike. So there was a deposit into the bank account of $800, let's say. But then if you don't do reconciliation at that time, four years down the road, you're not going to remember what that $800 was.

So it's important every month like let's say for the bank reconciliation, do that on a consistent basis like having that reconciliation done.

CC: What are some common mistakes that you might see clients make when they're filing their taxes?

Chantal: So one common mistake that we see many business owners aren't aware, that there's different requirements for businesses that are incorporated or not incorporated. So it's important to know which one best describes your business. So don't try to cut corners when you're doing your taxes. Because that can lead to mistakes. So like we were talking about earlier, the bookkeeping system.

CC: The shoebox.

Chantal: And you know the shoebox. Or throwing it in because it's saving you time right now to have to do it. But we don't want to have those mistakes or those errors.

One other big tip that I give because more for self-employed individuals, I find I would meet with and we want to say 90% of the time they didn't have log books for the vehicle expense, motor vehicle expense.

So they couldn't verify that what they put in there. Like if you don't have the log book, there's no way to verify that. But it was always “I don't have time. It's too time consuming to do this logbook, like I simply don't have time.”

CC: Yeah.

Chantal: And they all want to save time and money. So for them it was a complete waste. They cannot spend time doing that. And a very large percentage of taxpayers, self-employed individuals, this was an issue or a thing. So I mentioned to them like, okay, so let's save some time with this expense. What can we do?

You definitely have a calendar. You need something for your day-to-day. You're busy with your business because time is really precious. So every end of the month, you sit there and you go through your calendar and you know where you've been. So you can calculate that mileage.

Today we have Google Maps. We have so many things that we can use, tools online comparably to years ago where you know, oh, I have to sit in the car and I have to press on this…the meter, and I have to stop it when I get to the point where I'm supposed to be at.

But now with Google Maps I can sit there and okay, I'm going here to here. How many kilometers is that? It tells me. So then they can look at their calendar. They can sit there and put all those things, that the mileage from Google Maps and they will know. They have their log book. It's right there. It's already 50% done, let’s say.

CC: And you can do that as part of the reconciliation.

Chantal: Yes, exactly. It's another thing like, oh, I'm sitting there end of the month. I have to do the bank reconciliation, and I need to do the mileage or my log book cause I already have it. It's just a different type of way of having a log book.

CC: Yeah.

Chantal: So that would that would be a big one on, you know, cutting corners, and the one that we see the most which is motor vehicle expense.

CC: Do specific businesses or types of work need more help than others?

Chantal: For different industries like they, they all have different needs. Some more than others. And like I was saying it, there could be a business like which is service-based, or they don't sell products like, there's a lot of differences when it just comes to that. But we're here to help anyone. So it doesn't matter which industry you're in, we're there to help you understand to meet your tax obligations.

And like I was saying at the beginning, the number of businesses I met with, and types that I didn't even know could exist, like various different businesses and industries. So we're here for it all.

CC: So you've helped a lot of businesses and a lot of different industries. How many businesses would you say the CRA has helped?

Chantal: So our liaison officers have helped over 125,000 businesses in Canada.

CC: Wow.

Chantal: We've helped many business owners over the years, some that have accountants and some that don't. But the LO service isn't designed or there to replace accountants, but more to be complementary to them.

Our goal is to educate small business owners and self-employed individuals about their tax obligation so they can spend more time on what they do best, which is running their business. Because I don't hear it as often now I feel, but more at the beginning when I started, it was like, “Well, I have an accountant. Why would I meet with you, like if I have them already to help me?”

And I would always tell them it's for you to be aware, and also like the language. Because I've met with business owners and they're like, I have no idea what that means. My accountant does that. And they're the ones that sign, like, they're the ones filing for their business, the accountant’s there to help.

So, it was just for them to have that awareness and the language of CRA. And I would tell them, I'm not expecting you to have this visit with me because you’ve got to drop your accountant, and you're going to start doing this yourself. It's just for you to be aware, have that awareness. And I tell business owners a lot of the times for good education, go look at those forms.

What do they look like? The T2125 forms that they have to fill out, self-employed individuals. Go look at it. Even though you don't file it. You know what it looks like.

The T2, which is very complex. Because there's like the T2 form, plus you got to add all these schedules and other forms that you might need to fill out.

So, just looking at it and seeing what's on there opens up those conversation with those accountants for them to be aware, “Hey, I see this on here. Like, is this something I'm eligible for? Like should I be filling this in like are you already filling this in?”

So that's what I think is very important for them to understand.

CC: Without revealing anything, what are some of the more interesting expenses that you've come across and you've seen clients ask if they can claim them?

Chantal: We definitely see some interesting claims that…one that I can talk about and probably pretty often, claiming like dress suits as a business expense.

CC: Okay.

Chantal: They think it's being reasonable because they're saying I bought this specifically for my business. I'm wearing this because when I meet my clients, I need to look business professional.

But, you can use a suit for a wedding, a funeral, like other events personally that you need to dress up for.

CC: Right.

Chantal: So we have to think that's not reasonable because I can use that personally. It's important to be able to note that there is a personal element to that expense. You have to take that into consideration.

Or some expenses as well, it's just that you can't claim fully as a business expense because of there's a personal element to that expense. So there's a list of what we talk about, different expenses that they really need to think, like is this reasonable why you're claiming a portion of this personal expense? I guess I can't go into more details than that.

Of like you know, talking about specific businesses that would use different expenses that are personal in nature. But we have seen some and all we can tell them is we can't tell them to change it. It's all about giving tips and being helpful. Just think in the back of your mind is this reasonable?

CC: Got it. Where can we learn more about the Liaison Officer program and request a meeting with an officer.

Chantal: So they can request the service or get more information on canada.ca/LOhelp. There is a video there that explains what we do. We have so many other resources to help you out. So like the benefits and credits tool that I talked about earlier.

But looking at that video first hand, I think is, it gives you a great idea of what kind of help that we can offer. So definitely visit the Liaison Officer page.

CC: Awesome.

Well, thanks for sharing all of this information today. Chantal, I've learned so much.

Chantal: No problem. Thanks for having me.

CC: Thanks again to our guest Chantal for joining us on today's episode of Taxology. To request a visit from the liaison officer, go to canada.ca/LOhelp. And while you're online booking your visit, don't forget to follow us on Facebook, X, or Instagram @CanRevAgency and come back for more episodes covering everyone's favorite topic, taxes!

Until next time I'm your host CC. Stay safe and do your taxes.