As the tax deadline closes in, the same line gets repeated in living rooms across the country: if only I had kept better records, I could have claimed that. The pledge to do better next year rarely survives the rest of January.
Last-minute panic is preventable. Up-to-date, accurate records are the foundation of a real financial plan, and the time they save you in any given year typically pays for the system that produced them.
How long should you keep your records?
For tax purposes, the minimum is six years from the end of the tax year the records relate to. CRA can ask for them up through that window, so we suggest seven to give yourself one year of buffer.
Some records should be kept indefinitely: legal agreements, mortgage documents, share certificates, articles of incorporation, immigration papers, and anything that establishes the cost base of an asset you still own.
Accurate records pave the way
Accurate records are also what stand between you and CRA in an audit. Incomplete records create real problems. The fix is two steps.
Step 1. Keep one central record
A single bookkeeping file (cloud accounting software, spreadsheet, or physical record book) where every transaction lives. Not multiple partial records. One source of truth.
Step 2. Use a chequing account that does the work for you
For business owners, run a dedicated business chequing account so the bank does most of the tracking automatically. Keep the supporting receipts alongside, since they evidence what each transaction was for. Receipts also matter for warranties and other non-tax purposes.
Two essential checks each month
- Reconcile against the bank statement. Circle any debit on the statement that does not match a transaction in your records (usually a service charge), and book it.
- Confirm deposits. Compare bank deposits on the statement against deposits in your records. This is where missed income most often slips through.
Doing these two checks every month, the same week the statement arrives, eliminates the year-end scramble.
What records should you keep?
Income side
- T-slips: T4, T5, T3, T4A, T4A(P), T4A(OAS), T5008, and so on
- Capital gains supporting documents (statements of buy and sell)
- Real estate rental income statements and supporting receipts
- Interest income confirmations
- Spousal or child support payments received
- EI benefit statements
- Self-employment income records (invoices, deposit logs)
Expense side
- RRSP and TFSA contribution receipts
- Spousal or child support payments made
- Medical and dental receipts (and travel logs for out-of-town treatment)
- Charitable donation receipts
- Casualty and theft loss documentation
- Non-reimbursed business expenses
- Vehicle logs (kilometres for business use)
Where to store it
Once it is organized, store it somewhere safe. Cloud backups work for most things. A safety deposit box is appropriate for irreplaceable originals. We hold copies of the documents we prepare for our clients on our secure portal, but you should have your own copies too.
Get the system set up once
We help clients set up bookkeeping systems that match the size of their business and the time they have to maintain them. The right system is not the most sophisticated one. It is the one you will actually use every month.