What receipts should a freelancer in Canada keep for tax time?

Good records are the difference between a smooth tax return and a painful audit. The CRA's position is simple: your records must include the original documents and provide the information needed to support your deductions and determine your tax obligations. If you are ever reviewed, organized records make it far easier to support every claim.

What counts as an adequate record?

The CRA requires anyone carrying on a business in Canada to keep books and records in English or French that are detailed enough to determine tax liabilities and obligations. In practical terms, that means a complete paper trail from earning the money to spending it:

• Income records: invoices you sent clients, contracts or statements of work, payment confirmations, and records of deposits into your business or personal accounts.
• Expense records: receipts and invoices for everything you plan to deduct — supplies, software subscriptions, home-office costs, travel, professional fees, advertising, and insurance.
• Bank and credit card statements: these corroborate your receipts and show the flow of money in and out of the business.
• Mileage or travel logs: if you claim motor vehicle expenses, you need a record of business kilometres versus total kilometres.
• GST/HST records: if you are registered, keep all sales and purchase invoices and any documents supporting input tax credits you claimed.

Electronic records are acceptable, provided they can be related back to the supporting source documents and your system can produce an accessible, usable copy. Given that thermal-paper receipts fade within months, photographing or scanning receipts as they arrive is often the more reliable option, not the lazier one.

Which receipts matter most at tax time?

When you sit down to prepare your return — typically reporting business income on Form T2125, Statement of Business and Professional Activities — these are the documents you will reach for first:

1. All sales invoices and proof of payment received, so your reported gross income is complete and verifiable.
2. Receipts for deductible business expenses, matched to the expense categories on your return.
3. Home-office documentation: measurements of your workspace, rent or mortgage interest, utilities, and home insurance, so you can calculate your business-use-of-home percentage.
4. Vehicle records: fuel, maintenance, insurance, and lease receipts, plus a mileage log separating business from personal use.
5. Records of tax instalments paid during the year, so the CRA credits them correctly against your balance.
6. GST/HST filings and supporting invoices, if you are registered (generally required once taxable revenues exceed $30,000 over four consecutive calendar quarters).

One caution: do not send your receipts to the CRA with your return. Keep them filed and ready in case the agency asks to see them.

How long do you have to keep them?

Keep your records and supporting documents for at least six years from the end of the taxation year they relate to. Two extensions to that rule are worth knowing:

• If you file your return late, keep the records for six years from the date you filed, not from the tax year end.
• If you have a notice of objection or appeal in progress, keep everything until the issue is settled and the time for any further appeal has expired — even if six years have passed.

If you want to destroy records before the retention period ends, you must first get written permission from the CRA using Form T137, Request for Destruction of Books and Records.

What happens if you cannot back up a claim?

If the CRA reviews your return and you cannot produce receipts or other documents to support an expense, the agency may disallow all or part of it. That means paying the extra tax plus interest — a cost that far exceeds the effort of keeping a receipt. A simple system (a folder per month, or a scanning app with automatic categorisation) prevents most of this pain.