The CRA requires you to keep records that clearly support the income and expenses you report on your tax return. For freelancers, this means maintaining organized documentation of every business transaction for a minimum of six years.
The Six-Year Rule
Keep all business records for six years from the end of the last tax year to which they relate. For your 2025 tax return (filed in 2026), keep records until at least the end of 2031. The clock starts from the end of the tax year, not the filing date.
There are exceptions that extend the retention period:
- If you file a return late, the six years begins from the date you filed
- If a CRA audit is underway or you have filed a notice of objection, keep records until the matter is resolved
- Business assets subject to CCA: keep records until 6 years after the asset is fully depreciated or disposed of
What Records to Keep
Income Records
- All client invoices you issued (with invoice number, date, amount, client name)
- Bank statements showing all deposits
- PayPal, Stripe, Wise, or other payment platform transaction records
- Client contracts or work orders
- Interac e-Transfer records
Expense Records
- Receipts for every business expense claimed (digital or paper)
- Bank and credit card statements for the business account
- Invoices from suppliers, software subscriptions, professional fees
- Home office: utility bills, lease/mortgage statements, property tax assessment, and a sketch or photo of the workspace
- Vehicle: mileage logbook, insurance, maintenance receipts, fuel receipts
GST/HST Records (If Registered)
- Copies of all GST/HST returns filed
- Records of GST/HST collected on each sale
- Records of ITCs claimed with supporting receipts
- Quick Method election form if applicable
Digital Records Are Acceptable
The CRA accepts electronic records — scanned receipts, PDF invoices, digital bank statements. You do not need to keep paper originals if you have clear, legible digital copies. Use a consistent filing system:
- Organize receipts by month and category (e.g., “2025 / Q3 / Software” folder)
- Save invoices as PDFs with a naming convention that includes the date and client (e.g., “2025-09-15_ClientName_Invoice_042.pdf”)
- Use accounting software (FreshBooks, Wave, QuickBooks) to store transactions with attached receipts — this makes T2125 preparation much faster
What a CRA Audit Looks Like for a Freelancer
In a correspondence audit (the most common type), the CRA sends a letter asking you to provide documentation for specific claims — often home office, vehicle, or meals. You have 30 days to respond with supporting documents. An organized digital filing system makes this straightforward.
Field audits (rare for small freelancers) involve a CRA auditor reviewing your records more comprehensively. If you are well-organized, these are manageable. If your records are disorganized or incomplete, a CPA can help reconstruct them — but this is expensive.
Practical Tools for Freelancers
- Wave (free): Invoicing, expense tracking, receipt scanning. Exports reports for T2125 preparation.
- FreshBooks (~$19+/month): More polished, excellent for client-facing invoicing and expense tracking.
- Dext / Hubdoc: Receipt capture apps — photograph receipts and they extract the data automatically and sync to your accounting software.
- Google Drive / Dropbox: Simple, reliable cloud backup for digital receipts and invoices.
Frequently Asked Questions
Can I throw away old paper receipts after scanning them?
Generally yes — the CRA accepts digital copies. However, for large or unusual purchases (major equipment, home renovation affecting your home office), keep the paper originals as a backup. For most everyday receipts, a clear digital scan is sufficient.
Do I need to keep records if I use tax software that stores everything?
Tax software stores the data you entered, not the underlying source documents. You still need to keep the original invoices, receipts, and bank statements that support those entries. If the CRA audits you, they want to see the source documents, not your tax software’s summary.
What happens if I can’t find a receipt for an expense I actually incurred?
The CRA may disallow the deduction if you cannot substantiate it. For small amounts, the CRA sometimes accepts reasonable reconstructed estimates (credit card statements, bank records showing the payment). For larger expenses, missing documentation is a real problem. Use a receipts app to photograph every receipt at the time of purchase.