Keep Your Accounting Records
Client often ask us which accounting documents they should keep. The general rule is that Canadians who file their income tax and benefit returns electronically, or who do not file information slips and receipts with their paper-filed returns, should keep their tax records on hand in case they are contacted by the Canada Revenue Agency (CRA) for 7 years.
After returns are filed, the CRA verifies the income reported, as well as the credits and deductions claimed. Reviewing filed returns is essential to protecting the integrity of Canada’s self-assessment tax system and to ensuring that Canadians pay their taxes. For the 2008 tax year, about 2.4 million individual returns were reviewed.
Some of the first reviews of deductions and credits are done when the returns are filed, and before taxpayers receive their notices of assessment. However, most reviews take place later in the year, as the CRA works to verify the information on an individual’s return and compares it with the information provided by other parties, such as employers, spouses, or common-law partners.
During this review process, the CRA may contact taxpayers to ask for more information on income sources or dependants. We may also request copies of receipts or information slips to support claims related to:
- medical expenses;
- charitable donations;
- child care expenses;
- spousal or child support payments;
- moving expenses;
- the home renovation tax credit; or
- registered retirement savings plan contributions
In addition, the CRA may ask you to support your claim by providing proof of payment in the form of cancelled cheques, bank statements, or other documentation.
Keeping your records on hand makes it easier to respond to these requests. It will also help you explain your tax and benefit situation to the CRA if you do not agree with your assessment or reassessment.
Receiving a request for receipts or documentation does not mean you are being audited by the CRA. When an individual is selected for an audit, the CRA tells them that their tax and benefit situation is being reviewed and calls to arrange a meeting to begin the audit.
Source: Canada Revenue Agency (CRA) News Release – Ottawa, ON June 3, 2010
