How Long to Keep Canadian Tax Returns: A Comprehensive Guide
Managing personal documents, including Canadian tax returns, is an essential aspect of financial organization. Many individuals wonder how long they should retain their tax returns. The duration for keeping these documents varies depending on several factors. In this article, we will discuss the importance of maintaining Canadian tax returns and provide a comprehensive guide on how long to keep them.
Importance of Keeping Canadian Tax Returns
Canadian tax returns are crucial for various reasons. They serve as proof of income, deductions, and credits claimed during a specific tax year. Here are some reasons why it is important to keep these documents:
1. Proof of Income: Tax returns serve as official documentation of your income for a given year. Employers, lenders, and government agencies may request this information to verify your income.
2. Audit and Reassessment: The Canada Revenue Agency (CRA) may reassess your tax return within three years of the filing date. Keeping your tax returns can help you respond to any inquiries or disputes that may arise.
3. Tax Credits and Deductions: If you claim tax credits or deductions, retaining your tax returns can be helpful when updating your tax situation in the future.
4. Proof of Age: In some cases, tax returns can be used as proof of age, especially if you were born before 1921.
How Long to Keep Canadian Tax Returns
The duration for keeping Canadian tax returns depends on several factors, including the type of tax return and any associated documents. Here is a general guideline:
1. Original Tax Returns: Keep your original tax returns for at least three years from the date you filed your return. This allows the CRA to reassess your tax return within that period.
2. Supporting Documents: Keep any supporting documents, such as receipts, invoices, and other proof of income or expenses, for at least six years from the date you filed your return. This ensures that you have adequate documentation to support any claims made on your tax return.
3. Capital Gains: If you sold an asset and reported a capital gain or loss, keep all related documents for at least six years from the date you filed your return. This includes proof of purchase, sale, and any adjustments made to the cost base of the asset.
4. Tax Returns for Previous Years: If you are planning to file an income tax return for a previous year, keep all tax returns and supporting documents for that year as well.
Exceptions to the General Rule
While the general guideline suggests keeping tax returns for three to six years, there are exceptions to consider:
1. Unreported Income: If you have unreported income, keep your tax returns and supporting documents indefinitely. The CRA may reassess your tax return at any time if they discover unreported income.
2. Refunds: If you have received a refund, keep your tax returns and supporting documents for at least three years from the date you received the refund.
3. Self-Employed Individuals: If you are self-employed, keep your tax returns and supporting documents for at least six years from the date you filed your return.
Conclusion
Keeping Canadian tax returns and associated documents is essential for financial organization and compliance with tax regulations. By adhering to the guidelines provided in this article, you can ensure that you have the necessary documentation to support your tax returns and address any inquiries from the CRA. Remember, it is always better to err on the side of caution and keep your tax returns and supporting documents for longer than the recommended duration.
