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A primer on keeping your tax records
April 26, 2019
5:50 am
Top It Up
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From Tim Cestnick in the Globe and Mail -

A primer on keeping your tax records

Tax season is quickly coming to an end for most. Yet, after you’ve filed your tax return, the story isn’t quite over because you have obligations to keep tax records for some time – although many people don’t.

[...]

KEEPING RECORDS

If you’re a person who carries on business in Canada, pays taxes here or collects taxes (including GST/HST), you’ve got obligations to keep tax records. By the way, a “person” can include an individual, corporation, trust, partnership, registered charity or non-profit organization. So, very few will escape the requirement to keep information handy that the taxman may want to review.

What records should you be keeping? Although our tax law doesn’t require you to keep any particular set of books and records, you’re required to keep adequate records to support the calculation of your taxable income and the amount of tax owing.

What this means, generally, is that you should be holding onto receipts, vouchers, cheques, invoices, tax slips and other documents to support your taxable income and taxes owing. What about credit card statements – will they suffice? Maybe. You’re likely fine as long as the statement precisely displays the amount and vendor name to substantiate your claim. The problem with a credit card statement, however, is that it doesn’t break out any GST/HST you might have paid, so for purposes of calculating GST/HST input tax credits, those statements won’t cut it.

[...]

https://www.theglobeandmail.com/investing/personal-finance/taxes/article-a-primer-on-keeping-your-tax-records/

April 26, 2019
10:20 am
Bill
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The Act establishes 3 years as the "normal reassessment period" so while you need to keep your records for 6 years CRA normally only reassesses back for 3.

April 27, 2019
6:57 am
harbottle
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I believe if a "person" carries back business losses for income tax purposes, then the period of reassessment can go back to another 3 years to the years where the losses were applied (3+3=6; hence 6 years records retention period).

April 27, 2019
7:21 am
Bill
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CRA allows you to go back and amend previous years' returns for various reasons for up to 8 years, I think it is. I just amended returns going back to 2014 for some expenses I just realized now I could have claimed in those years.

The 3 year period I was referring to is CRA's usual limit they use for typical reassessments, but even there CRA could go back further if they decide they want to, as long as they can show (i.e. onus shifts to them) that you made a misrepresentation (including an omission) due to neglect, carelessness, tax fraud, etc. They rarely do this, as far as I can tell.

April 27, 2019
8:20 am
harbottle
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Bill said
CRA allows you to go back and amend previous years' returns for various reasons for up to 8 years, I think it is. I just amended returns going back to 2014 for some expenses I just realized now I could have claimed in those years.

The 3 year period I was referring to is CRA's usual limit they use for typical reassessments, but even there CRA could go back further if they decide they want to, as long as they can show (i.e. onus shifts to them) that you made a misrepresentation (including an omission) due to neglect, carelessness, tax fraud, etc. They rarely do this, as far as I can tell.  

The 3+ 3 years is in reference to CRA initiated audits rather than taxpayer requested adjustments. For taxpayer requests, I think you can go back 10 years for missed credits under the fairness provisions.

April 27, 2019
11:13 am
Bill
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You're right, you can adjust up to 10 years back.

From what I understand CRA Audit's budgets are based on units, they go for the easy, quick hits and move on. I'm guessing no-one on here or anyone they know has ever been reassessed for more than 3 years back.

April 28, 2019
8:17 am
Norman1
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Bill said

The 3 year period I was referring to is CRA's usual limit they use for typical reassessments, but even there CRA could go back further if they decide they want to, as long as they can show (i.e. onus shifts to them) that you made a misrepresentation (including an omission) due to neglect, carelessness, tax fraud, etc. They rarely do this, as far as I can tell.

CRA has been successful in meeting those requirements in 152(4)(a)(i) for taxpayer neglect, carelessness, wilful default, or fraud.

In Dalphond v. The Queen (2008 TCC 427), the misrepresentation was found to be from taxpayer's neglect.

Found recent case Bédard v. The Queen (2016 TCC 179) about six taxpayers who appealed CRA's reassessment of their return outside the time limit. Three of the taxpayers lost their appeal. CRA was allowed to reassess because CRA was able meet the requirements in those cases. Interesting examples of Tax Court judge "mind reading" ! sf-laugh

April 28, 2019
9:47 am
Doug
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Norman1 said

Bill said

The 3 year period I was referring to is CRA's usual limit they use for typical reassessments, but even there CRA could go back further if they decide they want to, as long as they can show (i.e. onus shifts to them) that you made a misrepresentation (including an omission) due to neglect, carelessness, tax fraud, etc. They rarely do this, as far as I can tell.

CRA has been successful in meeting those requirements in 152(4)(a)(i) for taxpayer neglect, carelessness, wilful default, or fraud.

In Dalphond v. The Queen (2008 TCC 427), the misrepresentation was found to be from taxpayer's neglect.

Found recent case Bédard v. The Queen (2016 TCC 179) about six taxpayers who appealed CRA's reassessment of their return outside the time limit. Three of the taxpayers lost their appeal. CRA was allowed to reassess because CRA was able meet the requirements in those cases. Interesting examples of Tax Court judge "mind reading" ! sf-laugh  

Yeah, if you omit or mispresent something, then the 6-year limit (assuming that's 6 years after, not inclusive of, the tax year filed, right?) doesn't apply. Otherwise, though, the later of 6-years after you receive the Notice of Assessment for the tax year field or 3-years after your amended income tax return is re-assessed, correct?

Cheers,
Doug

April 28, 2019
12:26 pm
Bill
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CRA Audit's limit is generally 3-years. In additional they can go back as far as they want, whether there are records or not, if there's neglect, etc.

If you file your 2018 return on April 30, 2019 and CRA issues a NOA dated May 25, 2019 then CRA can only reassess 2018 year until May 25, 2022, is my understanding (again, assuming no neglect, etc).

There is a 6-year reassessment limit in certain limited circumstances (one example provided in post #3 above) thus the general 6-year limit for keeping records.

There are tons of court cases re CRA going beyond 3 years. They are typically like the two cited by Norman1, i.e. they involve circumstances the average taxpayer would not be involved in. My belief is there's a minimal chance of being audited in the first place by CRA (i.e. a full, comprehensive audit vs just being asked for some supporting documentation or questioning a particular line on the return) unless you are also involved in a business or businesses, and almost no chance of being assessed beyond 3 years (unless you're regularly up to no good). Again, I'd be surprised if anyone on here has ever met anyone who's been reassessed beyond the 3-year limit, wouldn't worry for a millisecond on that one.

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