Is paperless for me?

????????????????????????????????????????Dear TaxDetective
Why is the tax department requiring me to provide them with copies of my bank, credit, debit, loan and investment statements?

I chose the paperless option to avoid chopping down more trees. Is it all for naught?

Signed: Doing my bit for the planet

Dear Doing my bit…

The tax auditor is likely looking to confirm that your sales were collected, your purchases paid, and your investments accounted for. They can’t do that without your financial transaction statements and the documentation behind that, the reasons for deposits, cancelled cheques and transfers. They may want to compare your deposits to your revenue, and may assess if deposits are greater than revenue and the difference can’t be explained.

Going paperless requires a whole new level of awareness about electronic record keeping. In both Canada and the US, the CRA and the IRS, respectively, have rules about electronic records. You’ll find they have a great deal of information on the subject on their websites. It’s necessary to have electronic records available, in the correct format, for as many years as set out in the laws of various jurisdictions.

If the computer system isn’t secure, and backed up frequently with an off-site backup system; and there’s no organized system for storing documentation, the move to paperless can be a slippery slope.

Going paperless anyway? You’ve read the rules and are sure you can comply?

First, determine what it’s necessary to keep and how best to store it.

Second, create a procedure manual to record the system chosen so it can be recalled as often as necessary.

Third, just because you’ve gone paperless, doesn’t mean you can actually shred or destroy the paper. Unless you’ve used the right type of electronic record keeping tools, you may not meet the technical criteria.

Don’t lose heart. There are reasons to go paperless. Going paperless is great for convenience, for ease of search, or to share documents across platforms. In reality, for most of us, shredding the paper to go completely paperless is a vision that may not be achievable until electronic record keeping rules are easier to comply with.

But those reasons don’t mean you can destroy or shred your financial paper. If you haven’t kept your paper, there are ways to get it back. It may require some detective work, and it may cost if the financial institution isn’t prepared to provide it free of charge. If you were going paperless to save a tree, it may cost you to recover your paper. Sigh. Everything comes at a cost.

Regardless of whether systems are papered or paperless, what to keep is always the question.

To help you get started, here’s my “flipsnack” of a workbook for organizing financial paperwork:

Find out more at:

Signed: TaxDetective, Eileen Reppenhagen, CGA, Certified QuickBooks ProAdvisor in Delta, BC, Canada

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