Whenever a tax season rushes towards its end, taxpayers make the country a bustling town. Taxpayers are busy screening, organizing, and shredding thousands of tax documents. Everyone juggling around with documents is banged with common questions likes – for how long should I keep my tax records? When is it safe to scrap old tax documents?
These are simple questions, but you probably have heard different answers. The CRA statute has defined a different set of rules for agencies, businesses, and individuals. Generally, CRA states “if you file your return on time, keep your records for a minimum of six years after the end of the taxation year to which they relate.” However, if you file your tax return late, the six-year period also begins late. To play safe, it is often best practice to keep all supporting documents for 7 years to avoid any potential issues.
The records that you are required to keep are referred to as supporting documents by CRA. The CRA states “you are required by law to keep records of all your transactions to support your income and expenses.” If you are unsure what records to keep, below is the list of records that you need to keep as supporting documents. If still unsure, contact a bookkeeper.
Remember to keep all these records in an organized manner to make your life and tax season easier.
Note: The list above is not exhaustive.
The CRA requires business documents to be kept for a minimum of 6 years – but why is it important? In case your business is audited or to review your tax return, there may be a need for business documents from the last 6 years. Records can come in paper or electronic form as long as they include all supporting documentation.
Improper maintenance of records can result in audits and possible legal action. Running a small business or self-employment can be especially problematic, as inexperience can often lead to misinformation and even mistakes. That is why it is of significant importance to learn which documents you must keep on file and learn efficient organization and filing skills before an audit takes place.
Keeping track of all your supporting documents ensuring everything required is submitted can help you avoid penalties. There is a “repeated failure to report income” penalty. Many Canadians are charged with this penalty each year because they missed out on some income records or forgot to submit important documents such as T-slips. The penalty can be quite heavy, and many Canadians are not even aware of the existence of this penalty.
If you have an accounting firm, then there is no need to worry because they will do accounting tasks and bookkeeping.
Keeping records is one thing; keeping records organized is another! It is easier to pile up every document, but it is harder to keep data organized and filed. Storage is only useful when organized. CRA not only suggests organization – it is required. Let’s discuss some tips to organize daunting piles of supporting documents.
To reduce the cost of dealing with the inevitable accumulation of business documents that comes from doing business and paying taxes in Canada, and to provide sufficient evidence and support in the event of a review by CRA is only possible if you know what to keep, why to keep, how to keep and for how long to keep.
For effective record keeping, doubt means do not discard. Keeping your documents for too long is not harmful, but scrapping them too soon may be disastrous. We hope the information shared will help you determine how long to keep your tax records in Canada.
If you are looking for an International Tax Accountant in Canada, then feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional accountants will make sure to get you the maximum tax refund on your personal tax return.
Disclaimer:
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
Capital gain is the profit earned on the sale of a ‘capital asset’. Canadian Revenue Agency (CRA) defines securities in the form of shares, investment properties, bonds, and stocks as well as real estate as “capital assets''. Capital gain results when the selling price of an asset exceeds its purchase price.
Investments yield income when they are held and create capital gains when sold. We pay income tax on the income generated by investments and pay capital gain tax when investments are sold at a profit. CRA requires the following amounts to calculate any capital gains:
(i) Proceeds of the disposal: The selling price of the capital asset.
(ii) Adjusted cost base (ACB): How much is originally paid for the capital asset.
(iii) Outlays and expenses: Costs deemed necessary before selling, for example, fixing-up expenses, finder’s fee, commissions, broker’s fee, surveyor’s fee, legal fees, transfer taxes, and advertising costs.
If you still don't understand how to calculate tax you can contact an accountant.
Capital gains can be of two types: realized and unrealized.
(i) A realized gain occurs when a capital asset is sold at a level that exceeds its book value.
(ii) An unrealized gain is a potential profit resulting from an investment. This is a paper gain, reflecting an increase in capital investment’s value but has not yet triggered a taxable event, as the capital asset is yet to be sold.
Capital gains are taxed only when they are realized. Realized capital gains are further classified as long-term and short-term.
(i) Long-term capital gains are derived from assets that are held for more than one year before they are disposed of.
(ii) Short-term capital gains are derived from assets that are held for a year or less.
Capital gain tax rates depend on how long the seller owned or held the capital asset. You cannot earn any benefit from any special tax rate on short-term capital gains. Instead, these profits are usually taxed at the same rate as your ordinary income. Long-term capital gains are taxed at a lower rate than short-term gains. This tax policy is adopted to encourage investors to hold assets subject to capital gains for more than a year. A lower tax rate on long-term investment is an incentive given to invest in the economy-building companies rather than aiming to generate quick profits.
CRA’s tax laws surrounding capital gains taxes are more complicated than generally presumed by tax filers. In Canada, if you make money off a capital asset, you pay capital gains tax on it. You cannot play tips or tricks or exploit the loopholes in tax laws to avoid your tax liability on capital gains. Here you need to take on board a capital gain tax accountant to help you legally, and effectively mitigate the tax impact on capital gains.
Every tax type has different requirements, rules, and thresholds, finding all this data can create confusion and errors. The best course of action to make this job less stressful would be to consult a capital gain tax accountant or a reputable accounting firm. Doing this will keep more of your capital gains for yourself. There are plenty of ways to defer, reduce or even avoid capital gain tax. Tax accountant’s professional advice can prove these investment returns to be the most tax-friendly investment returns. They can help you determine what works best in your specific situation. You can also check out on an any accounting firm which will handle both of your work accounting and bookkeeping.
There are online directories comprising lists of several tax advisors. You can shortlist a tax accountant for advice on capital gain tax considering the following:
If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return, then feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
Disclaimer:
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
This will close in 0 seconds
