How long do I need to keep my tax records?

As a general rule, keep records for at least six years from the end of the tax year they relate to. The book recommends a year or two longer, because the CRA can reassess beyond the normal period if it suspects fraud or gross negligence. Records tied to property and investments should be kept indefinitely.

What makes the CRA more likely to audit me?

Common risk factors include being self-employed, running a cash business, working in a targeted industry, claiming expenses far above industry norms, large estimated vehicle or home-office claims, and discrepancies between your GST/HST and income-tax filings. The book’s advice is to keep your figures reasonable and consistent — "Blend. Blend. Blend."

Should I sign a waiver if the auditor asks?

Not without legal advice. A waiver extends the period in which the CRA can reassess you. The book’s firm guidance is not to sign one without legal counsel and not to be intimidated by an insistent auditor.

Can I challenge an audit result I disagree with?

Yes. You can file a Notice of Objection (generally within 90 days) and, if necessary, appeal to the Tax Court of Canada. The book suggests filing the objection promptly to start the process, then taking time to build a thorough case, while paying down a disputed income-tax debt to limit interest.

How to Audit-Proof Your Tax Return and Keep Good Records

Audits are feared, but the fear is mostly about the unknown. The reality is that good record-keeping and a calm, prepared approach defuse most of the risk — every dollar you can substantiate is a dollar the auditor cannot disallow. This guide, drawn from tax lawyer Dale Barrett’s "Pay WAY Less Tax!", covers what raises your audit odds, exactly which records to keep and for how long, and how to conduct yourself if you are selected.

What increases your odds of being audited?

Some audits are purely random — "like winning the worst lottery in the world," as the book puts it — and there is nothing you can do about those. But most audit risk is driven by identifiable factors tied to who you are and what your return looks like.

The recurring theme is that the CRA’s computers match and compare data, and outliers get attention. If a restaurant declares 15% cash sales while its neighbours show 24–28%, that is a red flag. The book’s memorable advice for staying off the radar: "Blend. Blend. Blend."

Being self-employed (no tax withheld at source)
Running a cash-heavy business
Working in an industry the CRA targets (e.g. restaurants, construction)
Claiming expenses far higher than others in your industry
Large or estimated vehicle and home-office expenses
Discrepancies between returns — especially GST/HST versus income figures

What records should you keep, and for how long?

The general rule the book gives is to keep your records for at least six years from the end of the tax year they relate to — and it suggests keeping them a year or two longer, because if the CRA suspects fraud or gross negligence it can reassess beyond the normal period.

Some records should arguably never be thrown out: anything tied to the purchase or sale of property, stock transactions and share registries, because you need them to calculate capital gains correctly when you eventually dispose of the asset. The book also stresses keeping originals — there is technically no statutory requirement to hold an original receipt for a business expense, but if an auditor asks for one and you only have a card statement or a scan, the expense can be denied.

Receipts, invoices and logbooks for every claimed expense
Bank statements, deposit slips and cancelled cheques
Property purchase/sale agreements and investment records (keep indefinitely)
Keep originals where you can; back up electronic records offsite

Why do good records matter so much in an audit?

The book makes a counterintuitive but important point: auditors deny expenses when records are imperfect, and not every auditor is a seasoned expert. A junior or rushed auditor may make errors and disallow legitimate expenses — and only solid records let you push back and defend your position.

It also warns against losing data to a computer crash: "Auditors can use missing records as a reason to disallow expenses, which is much more costly than a backup hard drive." In short, complete records are both your shield and your evidence.

How should you handle an audit if you are selected?

The book offers a clear playbook. Do not avoid the auditor — get in touch to schedule, but do not rush the audit before you are ready. Provide organized records (separated by year and expense type), not "a shoebox of receipts, gum wrappers and invoices." Give the auditor only what they need: for a three-year audit, provide the required journals, not ten years of your accounting file.

Other pointers: do not have personal conversations that invite questions about your lifestyle; if you have a representative, let them field the hard questions; and never sign a CRA waiver (which extends their time to reassess) without legal advice. The author also notes there is no privilege between you and your accountant, so if your records are messy or sensitive, a tax lawyer may be the safer representative.

Schedule promptly, but prepare before the audit starts
Provide clear, organized records — not a shoebox
Give only the documents required for the years under review
Do not sign waivers without legal advice; know your appeal rights

What if you disagree with the result?

An audit result is not the end. The book reminds readers there are several further opportunities to challenge a reassessment — including filing a Notice of Objection (generally within 90 days) and, if needed, appealing to the Tax Court of Canada.

A practical tip from the book: you can file an objection quickly with brief grounds to start the clock and stop collections on an income-tax debt, then take the following months to assemble a thorough package for the appeals officer. Interest keeps accruing during a dispute, so the book suggests paying down a disputed income-tax debt voluntarily even while you object.

This is general information, not tax advice. Tax rules and dollar amounts change every year — verify the current CRA rules or consult a tax professional before you file.

Frequently asked questions

How long do I need to keep my tax records?: As a general rule, keep records for at least six years from the end of the tax year they relate to. The book recommends a year or two longer, because the CRA can reassess beyond the normal period if it suspects fraud or gross negligence. Records tied to property and investments should be kept indefinitely.
Will a credit card statement prove an expense?: Often not on its own. The book notes that if an auditor asks for an original receipt and you only have a card statement or a scan, the expense can be disallowed. Keep original receipts and invoices, and back up electronic records offsite.
What makes the CRA more likely to audit me?: Common risk factors include being self-employed, running a cash business, working in a targeted industry, claiming expenses far above industry norms, large estimated vehicle or home-office claims, and discrepancies between your GST/HST and income-tax filings. The book’s advice is to keep your figures reasonable and consistent — "Blend. Blend. Blend."
Should I let my accountant represent me in an audit?: You can, and if your books are clean and your accountant is competent there is often no problem. But the book cautions there is no privilege between you and your accountant, so if your records are messy or there is something sensitive, a tax lawyer may be a safer choice because lawyer-client privilege applies.
Should I sign a waiver if the auditor asks?: Not without legal advice. A waiver extends the period in which the CRA can reassess you. The book’s firm guidance is not to sign one without legal counsel and not to be intimidated by an insistent auditor.
Can I challenge an audit result I disagree with?: Yes. You can file a Notice of Objection (generally within 90 days) and, if necessary, appeal to the Tax Court of Canada. The book suggests filing the objection promptly to start the process, then taking time to build a thorough case, while paying down a disputed income-tax debt to limit interest.