What receipts should I keep for taxes?

Holding on to receipts for taxes throughout the year will make your life much easier when it comes to filing your return. Not only will you save time on calculating your claim, you have all the important papers you need to reduce your taxable income. Whether you’re self-employed, an employee working from home, or still going into an office, keeping your receipts covers all your bases for claiming expenses.

Once your taxes are filed, you may think there is no reason to hold onto your receipts. The Canada Revenue Agency (CRA) can audit you at any time, and if this happens, you will need to provide the receipts and documents corresponding with the claims for that tax year. If you can’t prove an expense, they have the right to remove it, and you will end up owing additional taxes. The best way to avoid getting hit with a bill for tax deductions is to keep receipts and records for six years.

It can be daunting to think that you need to keep every single receipt all year to file your taxes. Don’t worry, that’s not really how it works. Not everyone will need to keep the same receipts, just those pertaining to you and your filing. Some tax deductions and credits are easier to track, like when a university sends a T2202A slip or a charity sends a tax receipt. Others require a bit of research to know what expenses you’re able to claim, like bus passes and phone bills.

Here are the standard receipts recommended to keep for income tax returns:

• RRSP Contributions
• Medical Expenses
• Employment Expenses (Covid-19)
• Home Office Expenses
• Vehicle and Mileage or Transit Receipts
• Student Loan Interest
• Professional Certifications
• Child Care
• Moving Expenses
• Child Support
• Alimony Payments
• Charitable Donations
• Professional or Union Dues
• Accessibility Expenses (Senior or Disability Credit)

If you’re one of the thousands of Canadians who now have a home office, thanks to the pandemic, it’s key to know how this can benefit your income tax return. The CRA has a comprehensive list of allowable expenses for employees working remotely due to Covid-19, including:

• Rent
• Electricity
• Heat
• Water
• Internet
• Maintenance and Minor Repairs

There are two ways to file work-from-home expenses:

Flat Rate Method: If you worked at home for at least 50% of your time, for a period of at least four consecutive weeks, the CRA will allow you to claim a deduction of $2 dollars per day, up to a maximum deduction of $500.

Detailed Method: You need a T2200S form from your employer in addition to supporting receipts and documents to claim up to $500 in allowable expenses.

We know you have enough going on in your life, and adding another organizational task is the last thing you want to do. Trust us, this one takes virtually no time, and you will be thanking us when it comes time to file your taxes. Having your ducks in a row starts with simple organization and staying on top of your paperwork throughout the year. Keeping tax documents organized will prevent you from running into issues with the CRA if they were to audit your taxes and require proof of documentation.

Tips for organizing receipts

Review receipts: This can be once a month or once every few months; just keep it consistent. That way, if you realize you are missing an important document, you have the time to track it down.

Make notes: Write detailed notes on your receipts so you can look back and know exactly what the expense was for.

Create a spreadsheet: If you have a lot of taxable expenses or are more of a type-A personality, a spreadsheet is a great way to organize your receipts.

Digitize: Welcome to 2023; it’s time to go digital. Taking a photo of each receipt frees you from the panic of losing the physical copy. There are plenty of applications to help with this.

Combine expenses: Keep similar expenses together. For example, all rent receipts for taxes in one folder and child care receipts in another.

Storage techniques

Deciding how and where to store your receipts is dependent on how many taxable expenses you have and your level of organization. How many of us grew up with parents who kept their yearly receipts in shoe boxes or Ziploc freezer bags? Those are still perfectly good options if you want to keep things simple. Filing folders are another great storage method, but some may find it easier to go digital. Cloud storage options and apps, like Keeper Tax, Wave, and Evernote, allow you to scan and categorize receipts.

If you haven’t saved receipts up to this point, this is your sign to start. But of course, things happen. If you lose a receipt or need to get a document that you can’t find, there are a couple of things that you can do.

The first step is to request a copy of the receipt from the vendor or issuer. In some cases, the CRA may accept a copy of your bank statements which prove that the funds left your account and were issued to the establishment. Things get a little trickier if you paid for something in cash. However, you could provide the CRA with an estimation to fill the gap but this may not hold up in an audit.

There are three main taxation categories in Canada that are all taxed differently. No matter which category you fall into, keeping your receipts and documents is required. If you are not sure which type to file, let’s investigate them.

Individual and sole proprietorship

This is the most common category for anyone employed by a third party or self-employed, but your business is neither a corporation nor a partnership.

Partnership

Partnerships are created between multiple people (two or more), which is not incorporated.

Corporation

A corporation is independent of its shareholders and owners; it’s a separate tax-paying entity.

Since the CRA doesn’t seem to be keen on cancelling tax season (we’ve asked), having a system in place for your tax receipts and documents will help lighten the load when it comes to filing. The CRA also provides a tax guide each year that Canadians can read to get familiar with the language and process.

Remember, a little bit of organization goes a long way. You will not only save time later, but you will also take advantage of all the tax deductions and credits you’re eligible for.