What Should I Hold Onto After Filing My Tax Returns?
If you have ever been afraid to dispose of financial records because you are not sure about if you might need to draw upon those documents at a later date, you may feel overwhelmed by the sheer volume of paperwork that you have accumulated over your adult life. If you’re looking to de-clutter or downsize, here are some handy tips about what documents you should retain and what you can safely destroy.
While it is generally considered that a three year time frame is reasonable to retain your personal tax returns, if the Canada Revenue Agency has a suspicion of fraud, they may elect to look deeper into your past. However, as a guideline, you may consider the following retention schedule for your personal financial records.
Completed tax returns
If you ask your accountant or tax preparer, they may recommend that you never dispose of your completed tax returns. In the event that there is a dispute at any time in the future about the status of your filing, you have the documentation to prove that you have. If you choose to destroy any of your returns, best practice holds that you should retain your returns and financial records for a period of seven years – and you may be mandated to do so for commercial returns.
The receipts and hard copy invoices and documents that support your annual return should be retained for as long as you hold onto the completed return for that year. When you dispose of your returns, you might also choose to take the same action with your supporting documentation for that tax year.
If there is ever an special circumstance in your income tax reporting when deductions for bad debts or securities may be claimed, you should hold onto the paperwork that supports your eligibility for those claims at a later date as applicable. Working with a Chartered Professional Accountant, they can help to identify which documentation may be valuable for this type of scenario.
Real estate documents
You should ensure to retain documentation related to any property you own for the duration of time that you hold the property. Should you sell the property or dispose of the real estate through any other means, it is recommended to retain the records of that transaction for a period of three years after it has been documented as part of your tax return. As a homeowner, receipts showing investment and improvements in the home or any re-financing you pursue may become relevant at the time of sale for tax purposes, so keep meticulous records of your properties.
If you have invested in stocks and bonds or other securities, you should retain accurate records that reflect any purchase, sale or redemption of these products and ensure timely reporting on your tax returns as applicable by jurisdiction. These records must be retained for at least as long as you hold these assets in your portfolio and for a period of at least three years after the sale or transfer of these items has been documented on your annual tax return.
Retirement Savings Accounts
There may be tax benefits and implications associated with your retirement savings accounts, so you should retain accurate records of these investments as well as any withdrawals that you make from these accounts which are considered to be additional income for your household. While you cannot often access your locked in retirement accounts, it is important to always have a record of their performance as it may relate to your overall financial picture.
If you are going through your records and considering disposal of any financial records, first consult with your accountant to ensure that you are not putting yourself at risk by failing to retain any critical items. Our team at Rutwind Brar can help you identify what you should retain and what might be safely destroyed without compromising your financial situation in the present or the future.