Keeping Records — Montreal CPA Firm Near You: How to Organize, Store, and Protect Your Tax and Business Documents

Keeping proper records is one of the most important responsibilities of any business owner, professional, or self-employed individual. Records are not just receipts and invoices—they include all accounting, tax, payroll, GST/QST, property, banking, and electronic information that supports the amounts you report to the Canada Revenue Agency (CRA) and Revenu Québec. Well-organized records protect you during an audit, support deductions and credits, and make it easier to manage cash flow and growth.

This guide explains what “records” really mean in practice, who must keep them, what they must contain, how long you must keep them, what formats are acceptable, and how CRA views electronic record keeping and audit trails.

Legal and Regulatory Framework

Under the Income Tax Act and Excise Tax Act, anyone carrying on a business, filing GST/HST returns, running payroll, claiming rebates or credits, or holding specialized status (like charity, trust, or corporation) must keep adequate records. These records must:

• Be complete, accurate, and readable

• Be available in Canada (physically or electronically)

• Be retained for prescribed periods (generally at least six years from the end of the last tax year they relate to)

• Permit CRA to verify income, deductions, credits, GST/HST, payroll, and other tax obligations

Records include both paper and electronic documents, such as:

• Sales invoices, contracts, receipts, estimates

• Purchase invoices and supplier statements

• Bank statements and cancelled cheques

• Loan and lease agreements

• Payroll registers, T4/T4A summaries

• GST/HST and QST reports and working papers

• Motor vehicle and mileage logs

• Property purchase and sale documents

• Corporate minute books and shareholder records

• Electronic POS and ecommerce reports

• Email or digital documentation supporting transactions

Information circulars such as IC05-1 (Electronic Record Keeping) and IC78-10 (Books and Records Retention/Destruction) provide technical guidance on formats, retention, and destruction.

Key Court Decisions

Courts have consistently sided with the CRA when taxpayers fail to maintain adequate records. Common themes from case law include:

• If a taxpayer cannot produce records, CRA is entitled to reconstruct income using indirect methods (bank deposits, lifestyle analysis, industry averages).

• Unsupported expenses, credits, and deductions may be denied in full.

• Electronic systems must provide an accessible and reliable audit trail; if data is incomplete or altered without backup, CRA can reject them.

• The burden of proof is on the taxpayer to support what appears on returns.

These decisions underscore that “no records” or “poor records” is not a defence: if you claim it, you must be able to prove it.

Why CRA Targets Record Keeping

CRA reviews record keeping because:

• Inadequate records often hide underreported income

• Cash-heavy businesses are higher risk

• GST/HST refunds and ITCs rely heavily on documentation

• Payroll errors cause CPP/EI and T4/T4A issues

• E-commerce and electronic systems can be complex and poorly configured

• Charities, trusts, and corporations have specialized record obligations

Key risk factors include:

• Missing or incomplete invoices

• No mileage log for motor vehicle claims

• No breakdown of cash vs. card sales

• No backup of electronic accounting data

• Destroyed or lost records without CRA authorization

• Inability to reproduce source documents (POS, ecommerce, platforms)

CRA expects records to clearly show the sequence of each business transaction from start to finish—this is the “audit trail.”

Mackisen Strategy

Mackisen helps clients design record-keeping systems that are both CRA-compliant and practical. We:

• Assess current record-keeping practices (paper and electronic)

• Identify gaps that would create audit exposure (missing documents, poor backup)

• Recommend systems for income, expense, GST/QST, payroll, and property records

• Set up structured digital filing (by year, account, vendor, and customer)

• Implement mileage tracking and business-use-of-home documentation

• Align accounting software with CRA requirements and audit trail standards

• Advise on retention and destruction policies (including imaging and backups)

• Prepare clients for CRA reviews and audits with checklists and document maps

Our goal is to make your records clear enough that any CRA reviewer can understand your business in minutes—not days.

Real Client Experience

A contractor kept only bank statements and discarded receipts. During a CRA review, Mackisen helped reconstruct expenses using supplier statements, cheque images, and email confirmations, preserving many deductions that would otherwise have been lost.

A growing ecommerce business used multiple platforms (website, marketplace, payment processors) without integration. Their sales reporting did not match bank deposits. We built a record structure that matched orders, payment reports, merchant fees, and GST/QST filings, giving the CRA a complete audit trail.

A professional practice used only paper files with no scanning and suffered water damage to archives. We helped implement a new hybrid paper–electronic system, including routine imaging, cloud backup, and retention/destruction protocols.

A corporation and related trust were keeping incomplete minute books and shareholder records. We worked with their legal and tax team to rebuild core corporate records, supporting loans, dividends, and capital transactions.

What Are Records, Who Must Keep Them, and Why It Matters

Records include all accounting and financial information, in any format, related to your tax obligations. You must keep records if you:

• Carry on a business (sole proprietor, partnership, corporation)

• Are a GST/HST or QST registrant

• Have payroll and file T4/T4A slips

• Run a charity, trust, or other regulated entity

• Claim business-related deductions or ITCs

Good records:

• Support your income and expense totals

• Shorten audit timelines and reduce stress

• Allow you to correct errors proactively

• Help you obtain financing (banks often ask for clean records)

• Support valuations and due diligence if you sell your business

Business Records: Income, Expenses, Motor Vehicle, Property

You must keep:

• Income records: sales invoices, receipts, contracts, POS tapes, online sales reports, merchant processor reports, rental agreements.

• Expense records: vendor invoices, receipts, expense reports, credit card statements (with detailed backup), proof of payment.

• Motor vehicle records: mileage log, fuel and repair bills, lease/loan agreements, insurance.

• Property records: purchase and sale agreements, legal fees, appraisals, capital cost schedules, renovation invoices.

For each transaction, CRA should be able to follow:

1. Source document (invoice, contract)

2. Recording in your books (journal entry or accounting software)

3. Receipt or payment (bank or card)

This is your audit trail.

GST/HST and Payroll Records

If you are a GST/HST registrant or employer, you must also keep:

• GST/HST returns and working papers

• Documents showing GST/HST collected and ITCs claimed

• Payroll registers and calculations

• T4 and T4A slips and summaries

• Records of CPP/QPP and EI remittances

• ROE (Record of Employment) documentation

For registrations and rebates (e.g., housing rebates, charities, special refunds), CRA expects the underlying documentation to be organized for quick verification.

Special Entities: Corporations, Trusts, Charities, Political Entities

Certain entities have enhanced record-keeping duties, including:

• Corporations: minute books, shareholder registers, board resolutions, share issuances and redemptions, financing documents, corporate tax returns and working papers.

• Trusts: trust deeds, beneficiary records, distributions, T3 filings.

• Registered charities and qualified donees: donation receipts, books of account, board decisions, program documentation.

• Political entities and official agents: contribution records, expenditure support, election filings.

CRA can revoke status or impose penalties when these record obligations are not met.

Acceptable Formats and Imaging Paper Documents

Records may be:

• Paper

• Electronic (accounting software, scanned images, PDFs, databases)

• A combination of both

Key rules:

• Electronic records must be accessible, readable, and backed up.

• If you image (scan) paper documents, they must be legible, complete, and available for CRA review.

• Destroying paper after imaging is allowed in some cases, but you must comply with CRA’s conditions (IC05-1 and IC78-10).

• Backups must be stored securely, ideally off-site or in the cloud, to protect against disaster.

If records are lost or destroyed (fire, flood, theft), CRA expects you to attempt reconstruction and may require independent evidence (bank, suppliers).

Where to Keep Your Records and For How Long

Records must generally be kept:

• At your place of business or residence in Canada

• For at least six years from the end of the last tax year they relate to

Longer retention may be required if:

• Returns are filed late

• There are ongoing audits, objections, or appeals

• Certain legal or corporate obligations apply

To destroy records earlier, you must request and obtain CRA permission in writing. Without formal permission, early destruction can be treated as non-compliance.

Business Systems Review and Audit Trails

CRA sometimes conducts business systems reviews to:

• Evaluate your accounting software and controls

• Check whether systems leave a reliable audit trail

• Verify that all sales and income sources are captured (including e-commerce)

You should be able to show:

• How transactions flow from source documents into the system

• How adjustments are made and logged

• Who has access and what controls exist to prevent deletion or alteration of data

• That backups are reliable and regularly tested

If your business uses IFRS or other reporting frameworks, your financial statements must still be supported by underlying records that meet CRA’s tax requirements.

Common Questions

Do I really need to keep records if I’m very small or part-time?
Yes. Any business activity requires records, even part-time or side businesses.

How long do I keep records?
Generally six years from the end of the last tax year they relate to, unless CRA authorizes earlier destruction.

Are bank statements alone enough?
No. You need invoices, receipts, and supporting documents in addition to bank statements.

If everything is in my accounting software, do I still need paper?
You must ensure electronic records are complete, backed up, and meet CRA’s standards. Paper can be imaged if rules are respected.

What if I lose my records in a disaster?
CRA has support programs, but you are expected to reconstruct records as much as possible using banks, suppliers, and other sources.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or preparing for a CRA audit, our expert team ensures precision, transparency, and protection from audit risk.

If you want to upgrade your record-keeping to CRA-compliant, audit-ready standards, Mackisen can design your system, organize your documents, and put in place the procedures that protect both your business and your peace of mind.