Recent Case on Proper Books and Records

Proper books and records is a phrase that we hear a lot. The Income Tax Act requires that every taxpayer, whether they are an individual, a corporation or a charity, keep records that prove that the receipts agree with the numbers that have been used to file tax returns.

A recent court case (2019 TCC 145) highlighted this problem. In this court case the charity could not provide documentation for money spent overseas. The result was that the charity has lost its ability to issue a donation receipt for a year. For most organizations the easiest way to fix this documentation problem is to stop paying cash for expenses. Use a debit or credit card, a cheque or an online transfer. It is important to be able to prove that you are the one who spent the money.

For a taxable entity the failure to keep proper books and records will lead to paying more income tax. This is because you will not be able to get a deduction for expenses when you cannot provide a receipt. This should be avoided because we all pay enough taxes.

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