You filed your taxes and received your refunds, do you keep your tax filing information or shred them? It may be a good idea to keep them handy for some time as the Canada Revenue Agency can perform an audit any time and you may wish to have those files handy as proofs. You might ask how long do you need to keep them for? Well this article will answer just that question.
How Long To Keep Tax Records In Canada?
You'll need to hang on to your Canadian tax documents for a minimum of six years. Starting with the close of the year after the one for which you filed a Canadian tax return, you must maintain all relevant documents.
Each year, the Canadian tax year runs from January 1 to December 31.
Whether or not you utilized a particular piece of supporting documentation for your Canadian tax return, you are still required to keep it.
PRECISELY WHAT DO CANADIAN TAX RECORDS CONTAIN?
Your Canadian tax files should contain copies of your Canadian tax return(s), assessment notice(s), and reassessment notice(s).
Your Canadian tax return is considered complete when it contains all the supporting documentation you need to prepare it. This may include:
2. Documentation of payments made for things like medical treatment or relocation, as well as for any other costs for which you sought a tax deduction or credit.
WHAT IS THE DEAL WITH KEEPING MY CANADIAN TAX DOCUMENTS FOR SIX YEARS?
The Canada Revenue Agency (CRA) might audit your tax return at any point within the six years after you file it, so you need to keep all your documents related to filing taxes in Canada.
Having your tax records in order will allow you to substantiate any claims you make to the CRA, so it's in your best interest to keep track of everything.
However, your Canadian tax records may need to be kept for a longer or shorter period, depending on the specifics of your situation.
You will get written or oral notification from the CRA if they ask you to preserve your tax records for a longer time than six years.
WHAT SHOULD I DO IF I WANT TO GET RID OF MY CANADIAN TAX RECORDS BEFORE THE SIX-YEAR PERIOD IS UP?
The CRA must provide its approval before you may destroy your tax records earlier than the specified retention term.
You should not dispose of your tax documents without first obtaining clearance from the CRA. You might risk criminal charges if you get rid of your tax records without first getting approval from the CRA.
You may submit a request to dispose of your tax documents in one of the two ways highlighted below:
1. Send your completed Form T137 to the Tax Services office.
2. Apply in writing to the Tax Services department.
HOW DO I KEEP TRACK OF MY CANADIAN Tax Records?
Your primary place of residence or company operation in Canada is where you have to keep your tax records.
When relocating, it is important that all of one's personal documents be taken along for the ride. Informing the CRA of a change in address is mandatory.
When it comes to your company's records, you'll need to get authorization before packing up and leaving Canada.
You may accomplish this by submitting a written request for approval to Tax Services. In the event that the CRA grants your request, you will be required to make your tax records accessible for auditing.
If you travel out of Canada and keep your Canadian tax records at a place outside of Canada from where you can access them electronically, such records will not be treated as records retained in Canada.
WHY DO I NEED TO KEEP MY INCOME TAX RECORDS?
You should keep all of your previous tax documents since the CRA may want to examine them.
In this situation, they will write you a letter asking for evidence to back up your claim. The events that follow are straightforward and not frightening at all. The CRA need only compare these records to the data you included in your tax return. Consider it a random audit of your reports to make sure they add up.
For the very slight possibility that the CRA decides to audit you, your prior tax returns will play a vital role. Again, having everything in one convenient location will help things go a lot more quickly and easily.
CAN I GET RID OF MY INCOME TAX RECORDS AFTER SIX YEARS?
After six years, you may safely dispose of your documents if you're sure you won't need them for anything else. You may want to just throw everything in the recycle bin and move on, but you shouldn't. Your files include sensitive information that identity thieves would want to access, such as your Social Security number and details about your place of work.
Shredding is your greatest option for safely discarding old tax documents. Make sure your computer is secured with a password if you want to file electronically and preserve digital copies of your tax data.
Having your privacy exposed is far more upsetting and difficult than having to keep outdated tax documents.
HOW TO MAKE SURE YOUR RECORDS ARE INORDER
It's one thing to maintain records, but quite another to keep those records in order. Data organization and filing are more difficult than simple paper stacking. Well-organized storage space is a valuable asset. Keeping things in order is not just recommended by CRA; it's mandated. Let's talk about how to tackle those mountainous stacks of paperwork.
Don't throw away any of your receipts. It would be best if you thought about grouping them into headings that make sense for your company.
Provide a summary of your expenses. Unfortunately, not all receipts have clear explanations. It would be best if you took the time to briefly describe the circumstances under which each receipt was created since you may forget after a few months.
Documents should be stored both digitally and physically. Keep both electronic and paper copies of any documents you need to prove anything. Having both on hand will ensure that you are always ready for anything and will prevent you from having any serious issues in the future.
Knowing what to retain, why to keep it, how to keep it, and for how long will help you save money when it comes to dealing with the mountain of paperwork that inevitably builds up as a result of doing business and paying taxes in Canada.
When in doubt, retain it. That's a rule of thumb for efficient record keeping. In this case, keeping records for too long is nota problem, but getting rid of them too quickly might have serious consequences. We hope you find this information useful in determining how long to keep your Canadian tax records.