Accounting for a business involves a lot of moving parts. Some parts should stay put, at least for a little while. When it comes to your Canadian business records, it’s a smart idea to hang onto them, at least for a little while. Any accountant worth their salt will already have a system in place for storing and filing your previous tax records. There’s no need to guess what serves a purpose and what you can throw away.
So, How Long Should You Keep Them?
If the Canadian Revenue Agency decides to audit your business, you need to be prepared. No one wants this, but if you’re ready, you won’t waste time getting it over with. To make sure you’re always prepared, keep your records going back at least six years — and by that, we mean the end of the sixth year’s tax year. Technically, this means seven years as they want you to keep records based on tax year filings.
There are a few exceptions to this timeline. If you close your business and you’re a sole proprietorship or partnership, this six-year target still applies. However, if you’re dissolving a corporation, you must only keep the records for two years after the date of dissolution.
Where Should I Keep All This Information?
According to the CRA, you need to keep these records at your place of business or residence in Canada. The only exception to this is with written permission from the CRA to store them elsewhere. And by records, we mean both digital and physical files. All data must be readily available within Canada in the case of an audit.
However, this may not be the case for all your documents. In some cases, you’ll need to keep them forever. Purchase agreements or contract, for example, should be held on to.
What If My Records Are Damaged or Lost?
If you can’t provide your business records, accounting statements, or tax information due to damage or destruction, you’ll need to provide proof an incident occurred that resulted in damage. This could involve insurance claims, photos, or police reports.
If you want to destroy paperwork and documentation of your own accord, you must apply for permission to destroy your records. You’ll need T137 form and a written application to your tax service office.
Business owners are responsible for ensuring that their business records and accounting records are adequately cared for and stored to avoid damage or loss. In the case of electronic documents, this could be taking steps to ensure that files are backed up where data can’t be lost in the case of a crash or server damage. For paper documentation, having an electronic copy or a physical copy at a secondary location is a good safeguard. Keeping a backup set of documents off-site with an accountant is a great way to safeguard against lost documentation.
Need Some Accounting Support?
Are you interested in speaking with a team of highly skilled and passionate business and accounting specialists? At Genesa, we’re always here to help with your accounting needs. We can assist you in safeguarding your business against lost business records or missed opportunities you may not see for your business. Get in touch today.