Just the thought of an audit is enough to make most people nervous. Tax laws and deduction requirements can be confusing, and even a person who is confident they have done everything right may question if they have made a mistake when they hear about an audit. Fortunately, there are some simple things Canadians can do to avoid both audits and penalties. One of the most important is keeping the appropriate receipts. Canadian tax receipt requirements are simpler than you may think. Keeping the right receipts, and ensuring that they have the correct information, will reduce the chances of being audited––and, if you are audited, careful documentation will reduce the possibility of owing more in taxes. If you are being audited, or if you are concerned about whether you may have made a mistake with your taxes, you may want to consider consulting with an experienced Canadian tax attorney at Jeremy Scott Law by calling (902) 403-7201 and scheduling an appointment to discuss your legal options.
What Kinds of Receipts Do I Need To Keep?
While taxpayers might be tempted to keep every receipt for every purchase they make throughout the year, there are specific categories and specific expenses within those categories that they should save receipts for. These categories include:
- Medical expenses: All receipts related to health insurance premiums and other medical expenses paid for the taxpayer or the taxpayer’s family.
- Home and office expenses: If the taxpayer works from home, receipts from utilities, rent and similar fees, internet and phone costs, and home repairs, maintenance, and improvements.
- Vehicle and mileage expenses: If not compensated or reimbursed by the employer, receipts for gas, maintenance and repairs, interest paid on car loans, insurance, license, and registration fees, and a record of mileage for work-related driving. This category does not include personal vehicle expenses, however.
- Childcare expenses: Receipts from caregivers, daycare centers, and camps.
- Education expenses: Receipts from tuition, textbooks, other educational equipment, other student fees, and interest paid on student loans. Schools often issue a T2202 form with the necessary information.
- Adoption expenses: Receipts for agency fees, administrative and legal expenses for the adoption and travel.
- Moving costs: Receipts for transportation costs, storage fees, temporary living expenses, travel costs, lease cancelation fees, costs for updating address on legal documents, and costs of buying and selling homes.
- Charitable donations: Receipts from any donations made to a registered charity, registered national arts service organization, or other qualified beneficiary as defined by the Canada Revenue Agency (CRA).
What Information Does a Receipt Need To Be Valid?
The information a receipt needs depends on the type of receipt. Receipts for purchases will need different information from that required on receipts for a charitable donation.
Purchase Receipts
The purchase receipts category includes receipts for any property that is bought, sold, or traded. If a receipt is not provided, taxpayers can write the name and address of the seller or supplier, the amount paid, the date the payment was made, and the details of the transaction in an expense journal. When a receipt is provided, Canadian tax receipt requirements state that it should include:
- Date of purchase
- Name and address of the seller or supplier
- Name and address of the buyer
- A full description of the goods or services (if not included, such as on a cash register receipt, buyer can handwrite the description on the receipt or other voucher, or in an expense journal)
- The vendor’s business number (for pre-tax purchases of $30 or greater from GST/HST registered vendors)
Charitable Donation Receipts
Charitable donations require different and more detailed information from that required for purchase receipts. Canadian tax receipt requirements for charitable donations, per the Canada Revenue Agency, include:
- A statement indicating that the document is an official receipt for purposes of income taxes
- The charity’s name and address, as filed with the CRA
- Registration number issued by the CRA
- A unique serial number
- Location of receipt issuance (town, city, or municipality)
- The date or year the gift was received
- The date the receipt was issued
- The donor’s full name (including middle initial)
- Amount of gift
- Eligible amount of gift (this may be different from the total amount donated)
- The amount and description of any advantage the donor received in exchange
- The signature of an individual the charity has authorized to acknowledge gifts
- CRA name and website
- Non-cash gift receipts must also include a brief description of the gift and the name and address of the appraiser, if the gift was appraised
What Other Documentation Can Be Used in Place of Receipts?
In some cases, taxpayers may not have received a receipt, or may have lost the receipt. This does not mean that they cannot still file a claim. If you are missing receipts for a claim you have filed or want to file, Jeremy Scott Law may be able to help you.
If taxpayers are missing receipts, other options that the Canada Revenue Agency may accept include:
- A copy of the invoice together with the canceled check
- An itemized monthly bank statement that shows the invoice was paid
- Electronic receipts received by email or stored in the taxpayer’s account on the vendor’s website
- Copies of the receipt from the seller (buyer can contact seller to request copies)
What Happens if I Get Audited and Do Not Have Receipts?
If a taxpayer receives a notice that they are being audited by the CRA and they do not have receipts, the first thing they should do is try to get the receipts they need. In some cases, the auditor or auditor’s team leader may work with the taxpayer to find other ways to confirm the amounts reported in their return.
The outcome of the audit will rely partially on whether the receipts, or other proof, are found. There are three basic results: no change, a reassessment to owe more, and a reassessment to receive a refund.
No Change
The auditor determines the original assessment was correct and there is nothing more to do. The audit will be closed, and the taxpayer will receive a completion letter.
Reassessment To Owe More
If the receipts or other confirmation are not found, or other mistakes were made, the auditor may find the taxpayer owes more money and needs to pay the balance owing. Taxpayers are given 30 days to agree or disagree with the proposal and appeal the assessment if they disagree.
Reassessment To Receive a Refund
The auditor may find that the original assessment was incorrect, and the taxpayer has paid more than they should have. The taxpayer will receive a refund of the excess amount.
Do You Have Other Questions About Canadian Tax Receipt Requirements?
While Canadian tax receipt requirements may seem simple, knowing what to keep and what information needs to be on the receipt can sometimes be confusing. Not getting the necessary receipts, or losing them, can complicate your taxes and create problems if you are audited. If you need help making sure that your receipts are complete, organized, and ready to back up the information on your tax return, consider consulting with an experienced tax attorney with Jeremy Scott Law at (902) 403-7201 to discuss your legal options.