CRA Compliance & Documentation Guide
Owner: Mahdi Moradi Status: Draft Version: 1.0.0 Last Updated: 2026-03-17 Applies To: Company
Disclaimer: This guide is based on publicly available CRA guidance. Consult a qualified Canadian tax professional for advice specific to your situation.
1. Why This Matters
CRA can audit sole proprietors up to 6 years after a filing date. To defend your deductions, you need contemporaneous documentation — records created at or near the time of the activity.
This guide describes exactly what to keep, how to organize it, and how to be audit-ready.
2. Documentation Folder Structure
Maintain this structure digitally (in this repo under files/CRA-proof documentation/) and keep
physical copies where applicable:
2026 Business Documentation/
├── 1. Income Records/
│ ├── Shopify payouts
│ ├── E-transfer screenshots
│ ├── Invoices (consulting, friends)
│ └── Cookie sales records
├── 2. Expense Receipts/
│ ├── Domains + hosting
│ ├── Shopify invoices
│ ├── Software subscriptions
│ ├── Ads receipts
│ ├── Equipment receipts
│ ├── Phone + internet bills
│ ├── Travel receipts
│ └── Cookie supplies receipts
├── 3. Equipment (CCA)/
│ ├── Laptop receipt + FMV worksheet
│ ├── Phone receipt
│ ├── Monitor receipt
│ └── Accessories receipts
├── 4. Wife's Wages/
│ ├── Timesheets (weekly/monthly)
│ ├── Signed receipts
│ └── E-transfer confirmations
├── 5. Kids' Wages/
│ ├── Timesheets
│ └── Signed receipts
├── 6. Home Office/
│ ├── Mortgage interest statement
│ ├── Utility bills
│ ├── Internet bills
│ ├── Property tax statement
│ └── Home office calculation sheet
├── 7. Travel Logs/
│ ├── KM logs (date, from, to, purpose, km)
│ └── Parking receipts
├── 8. Business Activity Logs/
│ └── Weekly activity logs
├── 9. Project Files/
│ ├── Giftifye.com evidence
│ ├── Cookie business evidence
│ ├── AI platform development evidence
│ └── Consulting records
├── 10. LOC Funding/
│ ├── LOC terms and conditions
│ ├── Monthly LOC statements/
│ ├── Monthly business account statements/
│ ├── Draw transfer screenshots/
│ └── Annual interest summary
└── 11. Physical Documents/
├── Wife's 2025 signed receipt ($1,500)
├── Trade name declaration
└── Any hand-signed receipts or contracts
3. What CRA Looks For ("Reasonable Expectation of Profit")
CRA determines if your business is legitimate based on these factors. Your business satisfies all of them:
| CRA Factor | Your Evidence |
|---|---|
| Profit and loss history | Year 1-2 loss is normal; growth plan documented |
| Taxpayer's training/experience | IT professional with technical expertise |
| Intended course of action | Documented 5-year plan with milestones |
| Capability to show a profit | Multiple revenue streams, scalable SaaS product |
| Nature of the expenses | All directly related to business operations |
| Business plan | Complete business plan with revenue targets |
| Time spent on the activity | Documented activity logs (10-20 hrs/week) |
| Personal motivation | Business purpose, not hobby |
CRA Narrative Statement (Keep With Your Records)
"My business, operated under the trade name Bornara AI, began in 2025 as a sole proprietorship. In 2026, the business focused on two primary revenue streams: Bornara Tools (a free ad-supported online toolbox at tools.bornara.com) and a cookie baking business operated by my wife. Technology consulting was pursued on an opportunistic basis. Two additional streams (Giftifye.com e-commerce and an AI SaaS platform) were strategically deferred to 2027 to focus limited time and resources on executing the two core streams well. The business generated revenue of $[X] in 2026 against startup expenses totaling $[X], resulting in a net loss of $[X]. This loss is normal and expected for a business in its first full year of operations. The business has a documented 5-year plan, real customers, active marketing, and a clear path to profitability. All expenses are directly related to business operations and are supported by receipts, timesheets, and activity logs."
4. Documentation Templates
4.1 Business Activity Log (Weekly)
Record this weekly at minimum:
Date: 2026-XX-XX
Project: [Giftifye / AI Platform / Consulting / Cookies]
Tasks: [List specific tasks completed]
Time Spent: [X hours]
Outcome: [What was accomplished]
Notes: [Any relevant details]
4.2 Travel Log Entry
Date: 2026-XX-XX
From: [Start location]
To: [Destination]
Purpose: [Business reason]
KM Driven: [X km]
Fuel/Parking: $[X]
4.3 Meal/Entertainment Log
Date: 2026-XX-XX
Location: [Restaurant name]
Amount: $[X] (50% deductible = $[X])
Attendees: [Names and business roles]
Purpose: [Specific business discussion topic]
4.4 Wife's Timesheet
Week of: 2026-XX-XX to 2026-XX-XX
Name: Narjes [Last Name]
Rate: $[X]/hour
| Date | Hours | Tasks Performed |
|------------|-------|------------------------------------------|
| 2026-XX-XX | X.X | [Specific tasks] |
Total Hours: [X]
Total Pay: $[X]
Payment Method: E-transfer / Cash
Signature: _________________ Date: _____________
4.5 Kids' Timesheet
Week of: 2026-XX-XX to 2026-XX-XX
Name: [Child's name]
Rate: $[X]/hour
| Date | Hours | Tasks Performed |
|------------|-------|------------------------------------------|
| 2026-XX-XX | X.X | [Specific tasks] |
Total Hours: [X]
Total Pay: $[X]
Parent Signature: _________________ Date: _____________
5. Monthly Compliance Checklist
Do this at the end of every month:
- Update income log with all revenue received
- File all expense receipts (digital or physical)
- Complete wife's timesheet and make payment
- Complete kids' timesheets if applicable
- Update business activity log
- Update travel log
- Screenshot Shopify dashboard (revenue proof)
- Save advertising receipts (Facebook, TikTok, Google)
- Save software subscription invoices
- Update expense tracking spreadsheet
6. Quarterly Review Checklist
Every 3 months:
- Review revenue vs. targets (from 12-Month Roadmap)
- Review expense totals vs. budget
- Ensure all documentation is current
- Update CRA narrative if business direction changes
- Review wife/kids hours and payments for reasonableness
- Back up all digital records
- Take screenshots of all active websites (proof of business activity)
7. Year-End Checklist (December)
- Final payment to wife (ensure annual total is documented)
- Final payment to kids
- Complete home office calculation for the year
- Calculate CCA for all equipment
- Compile all T2125 figures
- Write year-end CRA narrative
- Gather all signed receipts
- Export Shopify revenue reports
- Compile advertising spend totals
- Review and finalize travel log
- Back up everything to multiple locations
- File with T1 return (Wealthsimple or accountant)
8. Evidence of Business Activity (Audit Proof)
Beyond receipts and logs, maintain evidence that your business is real:
| Evidence Type | What to Keep |
|---|---|
| Website screenshots | Monthly screenshots of Giftifye, AI platform, etc. |
| Social media activity | Screenshots of posts, follower growth |
| Email marketing | Campaign reports, subscriber counts |
| Shopify analytics | Monthly revenue/traffic reports |
| Customer communications | Saved emails or chat logs |
| Development activity | GitHub commit history (this repository!) |
| Ad platform reports | Facebook/TikTok ad manager exports |
| Client communications | Consulting proposal emails, contracts |
| Cookie orders | Order records, delivery confirmations |
9. Records Retention
| Record Type | Retention Period |
|---|---|
| Income records | 6 years from filing date |
| Expense receipts | 6 years from filing date |
| CCA schedules | As long as you own the asset + 6 years |
| Payroll records | 6 years from filing date |
| T2125 copies | 6 years from filing date |
| Business activity logs | 6 years from filing date |