Tax Thursdays: How Long Should I Keep My Tax Records?

By FreshBooks on May 16, 2013

Now that tax season is finally winding down, I bet you’re wondering how long you need to keep your tax records for? While it’s different depending on where you live, here’s the skinny for U.S. Canadian and UK residents:

In the U.S. the amount of time you need to keep your tax records depends on whether or not you owe money to the IRS. Keep employment tax records for at least 4 years. If you owe money because you reported a false income, keep your records for 6 years. For all other amounts owed, keep your records for 3 years. If you are waiting for a credit or refund, keep your records for 3 years – 7 years if the credit is from bad debt deduction. If you don’t file a return or file a fraudulent return (not recommended! ), keep your records indefinitely.

In Canada, you need to keep your tax records for at least six years. If you destroy or discard them before that window, you could be in danger during an audit. If you file an amended return after your original one, maintain your files for 6 years after the amendment.

Surprisingly, you don’t have to hold onto tax records for long in the UK. Hold on to them for a full year after you file

your returns, in case the HMRC asks to see your records. If you file after the January 31st deadline, keep them for a total of 15 months.

It’s easy to forget exactly how long you need to keep your business tax records for, so to get more detailed information visit the links above or bookmark this post for future reference.

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http://www.wallcpa.ca Andrew Wall

I am a big fan of keeping documents electronically. While CRA will accept electronic documents as valid source documents there are some rules to follow. CRA refers to scanning as imaging and provides the following guidelines

Imaging

Imaging means generating a readable reproduction of the original paper supporting document. The images can be produced by scanning the paper supporting documents to transform them into electronic files or by creating microfiche or microfilm.

Imaging a paper supporting document generally involves:

an accurate reproduction made with the intention of standing in place of the supporting document;

interpreting the reproduction to ensure it provides the same information as the supporting document; and

ensuring the reproduction is well defined and the significant details are not obscured by the limitations of the reproduction, for example, resolution, tonality, or hues.

For more information on document retention rules in Canada you can find the complete CRA guideline @ http://www.cra-arc.gc.ca/E/pub/tg/rc4409/rc4409-e.html .

Source: www.freshbooks.com

Category: Taxes

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