The CRA expects self-employed Canadians to keep detailed records of all business income and expenses for at least six years. You'll need to track invoices, receipts, bank statements, and mileage logs to support your tax return and survive a potential audit. Proper record-keeping starts from day one of your business and becomes easier when you use a consistent system (spreadsheet, accounting software, or a bookkeeper). Without solid documentation, you risk losing deductions, facing reassessment penalties, and losing credibility with the CRA. The CRA doesn't just trust your word on business income and expenses. They want proof. When you file your self-employed tax return, you're legally required to keep supporting documents that show: - How much money came in (gross revenue) - What you spent to earn that income (legitimate business expenses) - When transactions happened - Who you dealt with (clients, vendors, contractors) If you can't back up your claims with receipts or records, the CRA may disallow those deductions during an audit. This directly increases your taxable income and the taxes you owe, plus potential interest and penalties.
The CRA requires you to keep records for at least six years from the end of the tax year they relate to. This includes invoices, receipts, bank statements, contracts, and mileage logs. Keeping them longer is safer in case of disputes.
Yes, the CRA accepts digital copies of receipts and invoices. You should photograph or scan paper receipts and store them in a secure cloud location. Keep the original receipts for at least six years as backup in case the CRA asks to see them.
Without receipts, the CRA may disallow those deductions during an audit, which increases your taxable income and the tax you owe. In some cases, you can use credit card or bank statements as supporting evidence, but original receipts are always preferred.
Either method works for the CRA as long as your records are accurate, organized, and complete. Spreadsheets are free but require manual entry; accounting software automates invoicing and expense categorization, which saves time and reduces errors.
Absolutely. Only business-related expenses are deductible. Mixing personal and business spending makes it harder to claim the correct amounts and raises CRA red flags during audits. Keep separate bank accounts or credit cards if possible.