Records retention/distruction

I have 20 years of working paper files,T183, personal income tax and corporate income tax files kept in my home office. I use QuickBooks, CaseWare and TaxCycle. How best do I retain/destroy these records and stay within the CRA guidlines.

I assume these are client tax returns and client corporate returns. The signed T183 forms, according to the efile registration rules, must be maintained for 6 or 7 years (can’t remember which right now).

As for your working papers, personal tax returns, and corporation tax files, CRA doesn’t have a rule for the preparer. It is technically up to the client to maintain their records for the prescribed periods. You may want to keep past information for your own reference, to answer client/CRA queries, and for your own liability protection. It may also enhance the value of your practice if you have prior year information available. Destroying Quickbooks files may be difficult if your client doesn’t have a copy of the information. Certainly, I wouldn’t delete anything under 7 years old. Each year I do financial statements for a client using QB, I print a PDF copy of the G/L and put it in the Caseware file.

I went semi-paperless back in 2003. I scanned old files for T1’s and financial statement working papers (including the T2’s). It cleared out a few filing cabinets that I’ve never had to replace. I did it for my own information in case I had to go back and review something that happened in a previous year. Memory is cheap.

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Thanks Kevin I appreciate your feedback.

Records have to be kept 6 years after the latest Notice of Assessment date. So if you carry back a loss to the third preceding year, you have to keep it for about 9 to 10 years after the year-end. [assuming you file with in the 6 month dead-line]

Also, if you buy assets you need to keep proof of the ACB until the time you sell it + the same 6 years.

Currently there are conflicting image or physical document retention guidelines. In no particular order I will list retention items. You can decide which fit best for you.

Retention Periods Personal Tax

6 years
CRA states that the taxpayer is required to retain supporting documents for 6 full years from the last date of assessment or reassessment.

10 years
CRA allows filing or adjusting tax returns up to 10 calendar years from the current calendar year.

You can request an adjustment for any of the 10 previous calendar years online or by mail. For example, a request made in 2022 must relate to 2012 or a later tax year. Adjustment requests for different years should be on different forms. But, they can be mailed in together or submitted to us at the same time.

Lifetime of the transaction or claim + minimum required retention
Lifetime of the transaction or claim varies in period based on the type of claim.
For example, ACB of a capital gain item would be 6 full years from the later of the date of assessment or reassessment of the tax return reporting the proceeds and the ACB.
Other examples would include but not be limited to carry forward items such as charitable deduction, tuition, CNIL, ABIL, business use of home, etc.

Lifetime of the taxpayer
Some items may be required for the lifetime of the taxpayer.
Generally these are related to holdings, entitlements, ownerships, carry forward amounts, transferable amounts, contracts, insurance, ID, end of life legal documentation, etc.

Lifetime of the taxpayer engagement or lifetime of the business entity.
When I worked at Liberty Tax CRA required us to retain the T1013’s forever in image format and the T183 for 7 years.

Corporations are required to retain certain documents such as the Corporate Record Book for the lifetime of the corproation. Business owners are wise to retain the business investment, due to shareholder, tax returns, GL, share continuity, asset list, GST, return, Payroll return for the lifetime of the corporation. The supporting documents would have destruction policy by type of document.

Special CRA Projects
Documents related to aggressive tax claims or tax claims subject to CRA review or audit programs or tax court or other legal actions would be required to be retained until settled.

Multiple Citizenships, Foreign Holdings, Entry to or Departure from Canada, CPP contributions, T1 NOA
Some of these documents are to be retained until you retire or die.

Multi-Generational Assets
Some assets or trusts are multi-generational. Document retention is for the lifetime of the asset with legal and financial documents for each and every entity in each and every jurisdiction plus all the related laws, correspondence and legal judgements. One infamous Canadian example is the 3 or 4 generation long legal ownership claims of the BATA Corporation and the various holdco’s and operating co’s near Prague, in Holland, and in the various operating co’s including all the guardianship, changing country entities, changing laws, and other issues.

Of course some of these may be retained as images while some very important must be certified true copies and original physical documents. Each legal or tax jurisdiction has it’s own requirements and rules.