Bob Gauvreau walks through how to organize receipts for tax audits using digital tools like Hubdoc and QuickBooks. Keep records for seven years from your notice of assessment, scan physical documents, and store digital copies indefinitely when you can.
Questions this video answers
Seven years from the date of your notice of assessment.
Chapters
Okay, so let's talk about organizing receipts in your business. Probably not anybody's favorite topic, but I'm going to tell you why it's important and likely give you a very efficient way to do it. So organizing receipts inside your business, why would we want to do this? Well, from a tax perspective, when we're claiming expenses and we're making deductions, there's a chance that you could be audited by the IRS or, or by the Canada Revenue Agency. Now, both systems are essentially a voluntary tax system and a trusting tax system where we file, they assess our taxes according to how we filed it, knowing their rules, and there is a chance that they pick you to test later on. So if you think of going through the airport, you put all of your bags on, you go under the security, every now and again, they grab some random person and they start waving the wand to check the security to make sure that there's nothing extra, extra. That's, that's there. They maybe even check your bag. Right? That's what the government does related to taxes. Everybody's good. But every now and again, we're going to do a random spot check. So with organizing our receipts, if the government were to ask for evidence that those expenses exist, that's what those receipts do. They provide the evidence that those expenses actually were incurred, what they were for, and to make sure that they're legitimate. So what organizing those receipts does is it reinforces that deduction. It makes it very simple to deal with that organization or that agency, and it allows us to continue to maintain that as a tax deduction. So really important from a tax perspective that we have this now. When we're doing bookkeeping for our clients, we essentially tell our clients to keep those receipts. And here's why. I can do all of the record keeping on this side by seeing transactions happen, go through a bank statement or a credit card, I can track all of those. I know what the sales tax is going to be related to, any sort of purchase. I already know that information because that's what we do. But it's important for you as the business owner to make sure that you're retaining these receipts. Now, here's a little cheat code for you or a tip. There's software out there, like Hubdoc, for example, that's essentially a digital filing cabinet. So whenever you get digital receipts, you can either forward it right into Hubdoc, or you can set it up where it's got a separate email address and you send all of your bills and statements right into Hubdoc Hubdoc files these and organizes these. Now on our end, as our bookkeepers are doing the bookkeeping work related to this, they'll see those receipts come in and we'll actually attach it to transactions in the cloud based accounting solution like QuickBooks. So they're automatically being sent in. We're matching them so that when the government, or if the government were to ever test this and look at some of those documents, they're nicely organized and ready to go. It just keeps the stress levels low. It knows that from your standpoint, from a business, that you've checked all the boxes, you can sleep at night knowing that you're not going to have a big tax bill that comes out from an audit. So organizing your documents and keeping your documents is super important. Is it likely that you would never need them? For sure it is. But if you do need them, it's important that you have them. You have to keep your documents for seven years because the government can come back in and look at any or request any documentation for up to a seven year period. Beyond that, seven years from the date of your notice of assessment, you're good to go. To dispose of these documents. Now if it's digital, I would recommend keeping it forever. There's no harm, no foul in having it. If it's boxes upon boxes and it's causing you storage fees, we need to make sure that we scan the relevant ones. Like any equipment or any assets, those need to come with us. But any of the ongoing expenses, purchases, sales receipts, those can be disposed of. But err on the side of caution. Keep as much as you can. Organize these documents, use cheat codes or cheat software like Hub Document. Organize these documents, sleep at night and know that we're going to get access to these deductions.
