Records Management
Tax season is winding down and many of us are now facing piles of paper or electronic documents that we used for filing our taxes. The question now becomes: what records do I have to keep, and can I get rid of any of these piles of paper? We’ve created a quick and dirty guide for record keeping based on CRA’s regulations.
What records should I keep?
Personal: Keep any documents that support your tax return, including tax slips, receipts for expenses and donations, investment statements, bank statements, and pay stubs.
Business: Keep any documents that support your tax return (revenue and expenses), including but not limited to:
- Bank statements, cancelled cheques (make sure you save your electronic statements and cancelled cheques to your own computer as they are generated; bank websites often only make the records for the last year or two available)
- Donation receipts
- All payroll information including WorkSafe BC reports, ROEs and payroll deduction remittance forms
- GST/HST/PST reports
- Original receipts for purchases (including credit and debit card receipts) with paid taxes listed. Keep in mind that credit card statements are not sufficient.
- Sales invoices
- Purchase orders, contracts, work orders, delivery receipts
- Emails and general correspondence related to transactions (purchases or sales)
- Financial statements, tax records, ledgers, journals
- Investment statements, business vehicle records (including mileage logs and lease agreements)
Corporations: The list of records you should keep includes the same documents listed above for businesses, plus:
- Records of internet business activities
- Minutes of meetings of the directors
- Minutes of meetings of the shareholders
- Records of ownership of shares and transfers of shares
- General ledger showing year-to-year transactions of the corporation and any contracts or agreements necessary to understand entries in the ledger
How long do I keep them?
Generally, records need to be kept for six years from the end of the tax year to which the records relate. There are a few exceptions to the rule. Records need to be kept:
- Six years from the date the return was filed if a tax return is filed late
- Six years from the end of the tax year in which a non-incorporated business or organization ends
- Two years from the date of dissolution of a corporation
- Until a legal representative of a deceased taxpayer or trust has obtained a clearance certificate(s) to distribute property under his or her control
Additionally, corporations that amalgamate or merge must keep records as if the new corporation is a continuation of each of the original corporations. Sticking to a rule of six is always your safest bet if in any doubt.
Where and how do I store them?
Paper documents must be kept at your place of business or your home. You can destroy your paper documents if you scan and save them in a digital format that is both readable and accessible. Electronic documents can be stored anywhere in Canada; however, it is recommended that they are stored at a location other than your business. Documents that you originally received in an electronic format must be stored as an electronic document, regardless of whether you print and keep paper copies of them.
Remember, CRA can always ask for records to back up anything you’ve reported in a tax return, so make sure you know where you can find your records and that they are in a readable format. If in doubt about whether or not a document should be kept, err on the side of caution and keep it!