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The Ultimate Cheat Sheet on Maintaining Tax Records

Rahul Maingi

By admin, July 12, 2016

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tax return

‘Tax’– yet another word we dread. It’s a word that brings forth not so pleasant memories,Piles of paper, computer files and heaps and dozens of documents that need organization to meet the requirements of the Canada Revenue Agency (CRA). When it comes to taxes there is almost no space for shredding, recycling or just throwing important documents away.

One of the most important questions is how long should one maintain his/her tax records?

The simple answer to this question is – it all depends on the action, expense and the event for which the document needs to be recorded.

Why are records important?

There are many reasons. Proper documentation can assist you with various situations that may arise with CRA:

  1. A sudden CRA audit means a lot of stress (together with the stress that life is already gifting you in its natural course).
  2. The CRA audit means generating heaps of paperwork properly arranged according to the dates on which the data was gathered for proper presentation. (Who has time for that?)
  3. CRA audits avert any financial hazards that might arise in the process.

Lastly, neat and complete paperwork is a better way of furnishing the data to appropriate authorities. Unorganized paperwork can lead to tax penalties and disallowed expenses.

Period of limitations which apply to Income Tax Returns

Maintaining your tax record is an integral part of supporting any information you have provided to the CRA. As per CRA, any tax record must be maintained by an individual for a period of 6 years. The six-year period begins when you submit at the end of the tax year till the date to when the records are due to be submitted.

Tax records include returns and other supporting documentation used to prepare these reports. Documents which will furnish safe handling in this case will include expense receipts and “T4s that record employment income and at-source deductions and receipts for charitable donations”. (http://turbotax.intuit.ca/tax-resources/tax-tips/tax-records/how-long-should-i-keep-my-tax-records.jsp)

How exactly do they need to be Submitted?

For less than a year – ATM receipts, credit-card receipts, bank-deposits, investment documents and insurance policies. Reconcile these with monthly statements.

For a year or more – Loan documents, vehicular titles until sold, investment papers in bonds, stocks, mutual funds and everything else related to investment purchase confirmations, until sold.

For seven years – If there is a failure to report more than 25% of the gross income on tax returns, the government has 6 years to collect this pending tax before they start legal proceedings.

Forever – Birth and death certificates, marriage and divorce decrees, life insurance policies, estate-planning documents along with an inventory of the bank’s safe deposit box. Share a copy of this with your attorney.

What is the remedy?

Scared? Upset? Confused? Don’t be. Virtuous is your answer to all these issues.

With Virtuous by your side, you can now just scan and store your data in the cloud. Not sure, how to go about it? It’s pretty simple.

We are an organization that is trying to implement new technologies such as mobile apps, robust scanners and online cloud storage. With our encrypted scanning devices and our advanced cloud storage options your data can be furnished to our bookkeepers in just a blink of the eye.

We maintain all our clients with the ‘Fijitsu Scan Snap’ allowing them to just send across all their data to us the moment it is contrived. If scanning is too much of a bother you can always log on to the ‘SmartVault’ app take a picture and just upload it onto the cloud server instantly.

Cloud-stored data can always be accessed by you in a presentable format, on the ‘Quickbooks’ software maintained by our competent bookkeepers. All you have to do to be in the process is file the receipts properly.. You can then leave the rest to our bookkeeping team.

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