Do you have old tax returns that are simply gathering dust in your home? It might be time to look at which files you no longer need, but you should be aware of time lines.
The reason most people hang onto old tax documents is to provide support if the tax people come knocking.
So, just how long should you keep your old income tax records?
Canada Revenue Agency (CRA) says you should keep your supporting documents for at least six years. The CRA also notes that you should have the receipts and documentation to support your claims ready in case you are selected for a review.
The CRA’s Information Circular IC78-10R4 provides further information regarding books and records and their retention and destruction periods. This document is available electronically and outlines some additional information that taxpayers may read.
Certain sections of the Income Tax Regulations also deal with the retention of books and records. Under the act, books, records, and their related accounts and source documents have to be kept for a minimum of six years from the end of the last tax year to which they relate.
Failure to comply with this requirement could result in prosecution by the CRA.
The time periods for retention can be longer in other cases. People unsure that they have filed their tax return correctly may want to hold onto their tax returns for up to a decade. The taxpayer release provisions allow CRA to go back up to ten years. The federal minister may grant relief for any tax year that ended within ten years before the calendar year in which the taxpayer’s request or income tax return is filed. One example may be a person who has missed filing for the disability tax credit.
Taxpayers who have purchased property or investments more than six years ago in non-registered accounts should also retain the original confirmation slips, investment statements, and source documents. The time period for holding onto these documents could be significantly longer than six years. An example of this is an investor who purchased common shares many years ago and still owns them. To verify the adjusted cost base when the investment is sold or upon death, the original source documents should be retained.
In some cases, your accountant might have retained old copies of their tax returns. Obtaining an understanding of your accountant’s retention policies, if any, may also make your decision a little easier. Speak with your accountant before proceeding with destroying any documents. We also recommend obtaining an understanding of the record keeping requirements of your province as procedures vary.
Many people may like the thought of disposing of those files that pre-date the new millennium. We encourage people to take some precautions prior to disposing of any tax or financial information.
Your tax files have important information about you, including your social insurance number. With identity theft on the rise, we encourage all individuals to burn or shred all tax and financial documents including statements, credit card offers, receipts, insurance forms. Identity theft occurs when your personal information (including your name, date of birth, address, credit card, Social Insurance Number and other personal identification numbers) is stolen and used without your knowledge to commit fraud or other crimes. Be careful what you throw out in your garbage or recycling.
The website of the Office of the Privacy Commissioner of Canada lists five key steps to reduce the risk of identity theft.
- Protect your computer by using a firewall, anti-virus software and other security measures. An increasingly common practice is the use of malicious code (viruses, worms and Trojan horses) to acquire the personal information needed to commit identity theft.
- Always be suspicious of e-mails from financial institutions, Internet service providers and other organizations asking you to provide personal information online. Reputable firms generally do not ask for personal information in this manner, but if you are at all uncertain, look up their phone number in the phone directory and call them. Clues to fraudulent e-mails include lack of personal greetings and spelling or grammatical errors. Under no circumstances should you click on any links in the e-mail or cut and paste them into your browser – chances are the link will take you to a fake website.
- Identity theft does not solely take place online. Protect your mail – place outgoing mail in post office collection boxes or at your local post office. Promptly remove incoming mail from your mail box. Get into the habit of shredding or destroying pre-approved credit card, insurance or loan applications, bills, credit card receipts — anything that contains your personal information — when no longer needed. Also, get into the habit of checking your credit report on an annual basis — the major credit reporting bureaus will provide one free report each year.
- Do not give out personal information over the phone, unless you know the person to whom you are speaking, or you initiated the call yourself. If someone calls with an offer that sounds too good to be true, it probably is. Do not let them pressure you into disclosing personal information or making any other commitment — if they do pressure you, hang up.
- If, for any reason, you believe or suspect that your personal information may have been compromised, contact the proper authorities (bank, credit card issuer, credit reporting bureaus, utility provider, and so on) as soon as possible. Depending on the nature, extent and severity of the compromise, you should also consider contacting local law enforcement.