Income Tax Records - Stash Or Trash?
If you're like most people, chances are your office is a tornado of paperwork necessary to file a tax return! While this behaviour is normal, we're here to let you in on a little secret ... You don't need to keep every document associated with your income tax return! Realistically, hoarding every piece of paperwork you might need will actually make it more difficult to find what you really need when the time comes.
The CRA recommends you keep the receipts and documents necessary to support your claims for around 6 years. When you are up for review, you will typically be asked to present the following documents within 30 days of receiving the request.
- Any receipts from Charitable Donations
- Tuition and Education Expenses
- Child Care Expenses
- Child Support Payments
- Medical Expenses
- Moving Expenses
Exceptions to The Rule
While the CRA has a time frame of 6 years in which they can choose to audit you, there are a few exceptions to this rule. For example, if you under-report your income by 25% or more, or if your company is suspected of fraudulent returns, then the CRA can choose to audit you at any time, there is no limitation.
Other situations which do not fall under the Statute of Limitations include;
- You didn’t file a tax return, although you are mandated by law to do so
- You amended the tax return and received additional refunds
- You claimed a loss from a worthless security
Some people choose to keep these documents for purposes other than that of a CRA review. For instance, when applying for medical aid assistance programs, you will be asked to present proof of income. Having a past tax return ready would save you a lot of time and energy in that situation. Additionally, if you decide to take out a loan, or purchase an insurance policy, it is up to you to verify the amount of time you are required to keep that documentation. Some creditors and insurance companies ask you hold onto certain records longer than the CRA.
When and What Can I Shred?
After the 6 years, once you are certain you don't need those records, feel free to trash all T4 Forms, and Tax Return documentation. This includes any files or papers starting from the end of the tax year relating to the documents.
When discarding financial documents and reports that contain your personal data,it is best to destroy these documents to keep them safe from identity thieves and other people. The best way to do this is to use an onsite shredding service.