Which receipts should I keep for taxes?

Woman organizing receipts for taxes

What Receipts Should I Keep For Taxes?

Much like waiting in line at the DMV and corporate ice breaking activities, tax season is never welcomed. Every year we are all subjected to government-mandated math as part of our civic duties. The good news is, a little organization and preparation can help minimize your tax bill and maximize your refund. In this article, we will cover what receipts to keep for deductions, how to organize them, and some software options you can use to make filing your taxes a little less painful.

Table of Contents

Why Should You Keep Receipts 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.

Woman keeping receipts for taxes

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.

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Man organizing receipts for taxes

Which Receipts Should You Keep For Taxes?

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)

What Office-in-home Receipts Should You Keep For Tax Credits?

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.

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How To Organize Receipts For Taxes

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 2022; 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.

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What If You Lose The Receipts Or Haven’t Saved Them?

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.

Taxation Categories in Canada

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.

Tax Filing Software in Canada

Once you have saved all your documents and receipts for the year, you will be set to file your taxes. Whether you want to file on your own or pay someone to do it for you, there are plenty of paperless options for filing your taxes in Canada.

Wealthsimple Tax

This online tax assessment software, formerly known as Simpletax, is certified by the CRA and provides users with an easy and instant tax filing experience. Once you enter your information, hit the “submit your return” button and you’re all done. If you’re eligible for a refund, just provide your banking information and the funds will be deposited into your account within a week. In terms of pricing, Wealthsimple offers a pay what you can option. Beyond that, they provide a simple pricing model which is very affordable.

Credit Karma Tax

Credit Karma Tax is now Cash App Taxes, an entirely free system to file your taxes that can be completed in just minutes. You will need to download the app to file your taxes, and if you deposit your refund into the app, you will get it up to 5 days quicker than having it deposited into your bank account. They provide a max refund guarantee and double-check every detail to ensure your refund is accurate.

H&R Block

Canadians love H&R block for the variety of tax filing options they offer. Customers have the option to file in an office with a tax expert, drop off their documents for assessment, upload and have a remote tax expert assist with the process, or use their free tax assessment software. If your tax return is a bit more complicated, or you are looking for more support during the process, you can find what you need at H&R block. Pricing is varied and can cost up to a couple hundred dollars.

The Bottom Line

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.

Frequently Asked Questions

After filing your taxes, it doesn’t mean you can get rid of your receipts and documents. The CRA (Canada Revenue Agency) suggests keeping those documents for six years after your last Notice of Assessment. This may seem like a long time to hold onto the paperwork. However, there are situations where you may be required to provide these documents within that time frame, like being audited. The CRA can only audit you four years after filing, but keeping them for six is recommended.

When you keep tax receipts and documents for six years, it could become challenging to look back at an expense and remember what it was for. This is where annotating your receipts comes in handy. Annotating receipts means that you write notes and details on the receipt to help explain the expense. The information you should include is what the expense is and how the payment relates to your income tax return. It’s best to make these notes right after the purchase, so you’re not struggling to remember details later.

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