Tax Record Organization Tips: What to Keep, How Long to Keep it and More

You weren't the most organized of taxpayers this year.

You threw every receipt into an overstuffed drawer and avoided opening it until April. When tax season reared its ugly head, you sorted bits of paper for hours and pondered, "What was this receipt for again?"

But next year will be different. Next year, you'll meticulously keep records, store it in fancy accordion-style folders and file in January, not on April 29. Right?

Here's how to maintain tax records so that you, a personal accountant and an auditor can find it, deduct the amounts or process it -- without losing your mind.


What to Keep

Deciding which records to toss and which to keep can have a huge impact on your return and unfortunately, the process isn't cut and dry.What to keep depends on the individual and the list can run quite long, according to tax expert Cleo Hamel.

"The tax return shows a number of entries, if you take advantage of any line items, you should have supporting documentation to prove your claim," she said in a WalletPop chat.

Records you may not have considered include:

-Charitable donation receipts
-T5 slips from investment institutions
-Child fitness organization receipts to claim the Children's Fitness Tax Credit
-Slips for RRSP contributions and donations
-Medical/dental work receipts
-Monthly or consecutive weekly passes for public transportation
-Prescription drug receipts


Tax Slips

Employers and financial institutions will issue common slips like T4, T4A, T5 and T3. To see what slips you require to claim everything from CPP benefits to Universal Child Care benefits, visit the Canada Revenue Agency website.

If you don't receive a slip, file anyway to avoid fees and penalties for late applications that result in taxes owed. Attach an explanation to your return and calculate income and deductions with the papers you do have, the CRA says.


Can't My Accountant Do it?

Unorganized tax payers might want to hand over their mountain of receipts to an accountant, but this has drawbacks.

Such disorganization costs time and money, some tax preparers say.

Also, you ultimately hold responsibility for your own taxes, so failing to keep adequate books can land you in hot water in the future.


Last Year's Tax Papers

Just because you file your taxes, that doesn't mean you can throw those papers back into the drawer. Keep them organized in case the government selects you for an audit.

You should keep your tax returns and supporting documents for six years in addition to the current year, the CRA says.

And that's not all. The CRA has rules for how to keep you tax papers from previous years.

It's wise to back up files electronically for safety, but they must be readable and accessible, according to Canadian tax lawyers at Barrett Tax Law.

You can keep electronic records if information is created, processed and maintained electronically to begin with. Even if you print out hard copies of electronic records, keep the original ones on your computer.

In addition, you must keep your records at your residence in Canada, unless you request permission to keep them elsewhere.


Oops. I Destroyed Them.

Before you start banging your head against the wall, relax. You can fix this.

If you accidentally delete or destroy electronic records, the CRA advises you to alert the director of your local tax services office.

No matter what records you keep, keeping them organized and legible might save your skin in the long run.

For more information about keeping tax records neat and organized, see 'Five Cheap Ways to Organize Your Tax Papers.'