Losing your tax records is a significant challenge. Without receipts and documentation, claiming expenses and credits on your tax return is difficult. If you claim an expense you cannot document, the Canada Revenue Agency (CRA) will disallow it. The good news is you can work to reconstruct your records; the bad news is it will be time consuming. Here are some tips for replacing your records:
- Check your insurance policies to see if you have any type of coverage for record reconstruction, especially if you are a small business. It is not a cheap process, so it will help if your insurance policy can provide assistance.
- Make a list of what was in your records. This could include T or income slips, bank statements, home-office and vehicle expenses, charitable donation receipts and medical expenses. This list will help you determine who you need to contact to request records or duplicate receipts. If you own a small business, you should make two lists: one for your business and one of your personal tax return.
- You can draft a form letter that you can mail or deliver to everyone on your list, or develop a phone list so you can call each contact. You will need to explain to each contact what happened to your records and ask them to reconstruct as much as they can from their files.
- If you use online banking, you may be able to retrieve the information yourself. For small business owners, vendors or suppliers should be able to provide a list of your purchases and payments.
- The CRA will have all your T slips on file. You can register for My Account and you will be able to access all the information online.
- If you filed quarterly HST returns, ask the CRA for copies so you can see the income reported and the amount of input tax credits (ITCs) claimed. If you had a third-party working on your books, contact the firm to ask what paperwork it still has in its files.
- Request duplicate receipts from organizations or companies. There may be a nominal cost involved, but some will be free. For example, your pharmacy should be able to print out a list of your medication for the last few years and charities should have duplicate donation receipts.
No matter how meticulous you are, the records will never be perfect, especially if you are a small business owner. But you should do the best you can, and file based on what you can track down. If you have already filed your return and your records are lost afterwards, then you should still work to reconstruct the details in case the CRA reviews your return. But if it does, explain what happened. The CRA is not totally unreasonable under these kinds of circumstances.
Even if you do not need to reconstruct your records, it is always a good idea to back-up electronic tax and bookkeeping files and keep the disks at another location. No one wants to have a disaster, and preparing for one may save you some headaches later.