CRA Reviews and Audits: What Documents Should You Keep?
No one enjoys receiving a letter from the Canada Revenue Agency (CRA) asking for supporting documentation. Fortunately, most CRA reviews can be resolved quickly when taxpayers have retained the appropriate records.
Many taxpayers are surprised to learn that claiming a deduction or credit is only the first step. If the CRA reviews your return, you are responsible for providing documentation that supports the amounts claimed.
As a general rule, taxpayers should retain their tax records and supporting documents for at least six years after the end of the tax year to which they relate. This six-year period may be extended where a return has not been filed or where an objection or appeal remains active. In those cases, keep the relevant records until the return is filed and the applicable review, objection, or appeal period has ended.
Below are some of the most common areas reviewed by the CRA and the records you should keep.
Medical Expenses
Medical expenses are one of the most frequently reviewed personal tax deductions.
If you claim medical expenses, retain:
Original receipts showing the patient name
Prescription eyewear receipts
Dental invoices
Health insurance statements
Travel and accommodation records related to medical treatment, where applicable
Credit card statements alone are generally not sufficient. The CRA will typically request detailed receipts that show the nature of the expense, the date paid, and the service provider.
Charitable Donations
Charitable donation claims can reduce your tax bill, but only if proper documentation is available.
Keep:
Official donation receipts issued by registered charities
Documentation relating to gifts-in-kind
Records supporting any donated securities
The CRA generally requires an official donation receipt containing the charity's registration number and other prescribed information. A cancelled cheque or credit card statement is usually not enough on its own.
Work-From-Home Expenses
Although many pandemic-related temporary measures have ended, some employees may still be entitled to claim certain employment expenses when required by their employment arrangement.
If you claim work-from-home expenses, retain:
Employment contracts or agreements
Employer certification forms, where required
Utility bills
Internet invoices
Rent receipts
Records supporting the calculation of workspace usage
Maintaining complete records can make it much easier to support a claim if questions arise in the future.
Rental Property Records
Owners of rental properties should maintain detailed records throughout the year rather than trying to reconstruct information at tax time.
Important records include:
Purchase and sale documents
Mortgage statements
Property tax bills
Insurance invoices
Utility bills paid by the owner
Repair and maintenance receipts
Lease agreements
Property management statements
Good recordkeeping not only helps support deductions claimed on your tax return, but also assists in calculating any future capital gain when the property is sold.
Don't Forget Home Improvements
Homeowners should also retain documentation relating to significant renovations and improvements made to their property.
Examples include:
Kitchen renovations
Bathroom renovations
New roofing
Window replacements
Additions and major structural improvements
These expenditures may increase the adjusted cost base of your property and could become important if part of your principal residence is converted to a rental property, sold, or otherwise subject to future tax reporting requirements. Records relating to capital property, including purchase documents and receipts for significant home improvements, should be kept for six years after the end of the year in which the property is disposed of.
Electronic Records Are Acceptable
Many taxpayers now receive invoices and receipts electronically.
Provided the records remain complete, readable, and accessible, electronic copies are generally acceptable. However, subsection 230(4.1) of the Income Tax Act requires records created or maintained electronically to be retained in an electronically readable format. Keeping only printed copies may not satisfy this statutory obligation. Consider maintaining a dedicated folder for tax-related documents and backing up important records regularly.
A Little Organization Can Save a Lot of Time
The best time to prepare for a CRA review is before one occurs.
Keeping organized records throughout the year can help reduce stress, speed up the review process, and ensure you receive all deductions and credits to which you are entitled.
If you are unsure whether a particular document should be retained, contact the MAM CPA team. We would be pleased to discuss your specific circumstances and help you establish a recordkeeping system that works for you.
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Sources and Additional Resources
For additional information, please visit:
Lines 33099 and 33199 – Eligible medical expenses you can claim on your tax return - Canada.ca
Give to a registered charity or another type of qualified donee - Canada.ca
Disclaimer
The information in this article is intended for general information purposes only and should not be considered tax, legal, or financial advice. Tax legislation and administrative policies may change, and the application of tax rules depends on individual circumstances. AI Generated Content: This article was generated with the assistance of artificial intelligence (AI) and has been reviewed prior to publication.