See How Long You Should Keep Company Records
As a business owner, you should always keep your records, including tax documents, pay stubs, and other paperwork. To be in compliance with the requirements of the Canada Revenue Agency (CRA), business owners should keep most records for between six and seven years. Given the increasing cost of
As a business owner, you should always keep your records, including tax documents, pay stubs, and other paperwork. To be in compliance with the requirements of the Canada Revenue Agency (CRA), business owners should keep most records for between six and seven years. Given the increasing cost of document storage, meeting these guidelines may seem like a tall order. Don't let your document storage costs skyrocket; start working with Blue-Pencil today. Award-winning document storage in the GTA; get a quote in 30 minutes
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Documents related to a company should be kept for at least seven years.
All vital business records in Canada should be kept for at least seven years. Canadian and American tax law differ in terms of how long paperwork must be kept. S - Use Canada Revenue Agency (CRA) rather than Internal Revenue Service (IRS) rules. The Canadian Revenue Agency states that businesses and individuals only need to keep records related to taxes and operations for a period of six years. But if you're late in filing your taxes, the six-year clock doesn't start ticking until after you pay your taxes. Most experts recommend keeping all relevant paperwork for at least seven years (source) just to be safe.
To What End Are Business Documents
For what purposes does a document need to be considered a business document? What kinds of records should a business keep, and what kinds should be discarded? The Canada Revenue Agency (CRA) states, "you are required by law to keep records of all transactions to support income and expenses." Furthermore, they recommend that business owners maintain a detailed, day-to-day record of all of their financial transactions. Each of your businesses should have its own set of records to prevent any mix-ups. In addition, the CRA advises that you keep these documents on file in case you are audited or asked to provide them at a later date.
Please refer to the following list for a brief description of each type of business document to keep, along with some examples, if you are unsure of what records to keep. To simplify your life and your tax preparation, be sure to keep all the following records in a neat and orderly fashion.
Please keep in mind that the following is not an all-inclusive list. See this link for more information on the importance of maintaining accurate financial records for tax purposes.
Evidence of Earnings
Gross income is the total earnings made by a company before any expenses are subtracted out (this includes any costs incurred in producing and selling a product). It is important to keep track of how much money you make, when you make it, and where it comes from. Original documents must be provided to verify income figures. The following are some examples of original proofs of income:
- Contracts
- Receipts
- Deposit receipts
- Expense Receipts
Canada's Federal Government Is Our Original Source
Data Relating to Expenditures
When making a purchase for your company, be sure to save all receipts or other documents that can serve as proof of payment. Your purchase details should be listed on the receipt. The Canada Revenue Agency understands, however, that this is not always the case. If that's the case, it's your responsibility to detail what you bought and how it was delivered by noting specifics on your receipt or in a log. Information such as the date of purchase, the seller's name and address, and other pertinent details should all be included on the receipt or purchase document.
Canada's Federal Government Is the Original Source
Articles of Title
Maintaining a log of your real estate transactions is also highly recommended. Include pertinent data in these records, such as:
- Who was the property's seller?
- Amount you put down on the home.
- When you first purchased the home.
Capital cost allowance (the deduction you can claim over 12-month periods for the cost of depreciable property) is one type of claim that can be calculated with the help of these records, as mentioned by the CRA.
Originally from the Canadian Government
The Importance of Archiving Company Records
Why is it crucial for businesses to keep records for the minimum of six years, as stipulated by the CRA? Your tax return won't be complete without these items. For legal and tax reasons, many of these papers are indispensable.
When filing taxes or defending a business against an audit, it is imperative that pertinent records be kept for a minimum of seven to nine years. Reports from the past six years may be requested during a review or audit. Both paper and digital records are acceptable, provided they contain all necessary materials (source).
Audits and possible legal action are possible outcomes of improper record keeping. As of the end of the 2008-2009 fiscal year, 370,360 reviews and audits had been conducted. According to the source, 164 of those audits resulted in charges being filed with Canada's public prosecution office. Problems associated with inexperience are exacerbated when one is engaged in self-employment or the management of a small business. That's why it's crucial to know what records to keep and how to properly organize and file them before an audit occurs.
A "repeated failure to report income" fine may also be imposed. Every year, a large number of Canadians incur this fine because they failed to report all of their income or submit required documents like T-slips. Many Canadians are unaware of this penalty's existence, despite its potential severity. The "repeated failure to report income" penalty can result in significant financial consequences; in 2012, CBC News reported that a senior citizen had to pay $3,600. In order to avoid penalties like the ones mentioned above, it is important to keep track of all your documents and submit everything that is required.
Safe Document Disposal and Long-Term Archiving
Aside from just keeping records, it's also important to keep them in order. Everything that enters your office can be stored easily. There's more to keep track of, and it's more challenging to file and organize everything. The key to successful record-keeping, however, is organization. The Canada Revenue Agency (CRA) mandates, not just recommends, orderliness. Do-it-yourself document organization? Here are some pointers:
- You should save all of your receipts; it may help to classify them by the month, the item, or some other category that makes sense for your company.
- Keep in mind that not all receipts will have descriptions, as was mentioned above. It's easy to end up with a mountain of receipts and no recollection of what they were for after a few months. Spend a few seconds to jot down a few words about your purchase on the receipt.
- Record your daily expenditures and earnings in a journal. Get yourself a nice journal and keep it on your desk if you're the hands-on type. If you'd rather keep track of things digitally, you can either create a separate log document or dedicate a small section of another file, like a calendar, to this purpose.
- Separate your paper and digital records by scanning or photographing documents like receipts and saving them to your computer. Don't throw away the paper records just yet. It is prudent to maintain both options. You can avoid a lot of stress in the future if you plan for the worst.
Source: entrepreneur.com
Document Management Firms That Get The Job Done
Working with a professional document management firm is another sensible option for ensuring the safekeeping and eventual destruction of your company's records. You can rest easy knowing your company's vital records are safely archived with the help of a document management service, which will also free up valuable floor space in your office.
After the 6-7 year period has passed, it is crucial that tax records be destroyed in a secure manner. You can save time, money, and physical space as a result. Office shredding programs provided by Blue-Pencil allow customers to outsource the management of their document destruction in order to guarantee its safe and efficient destruction and recycling.
If you're worried about whether or not your current policies and procedures are up to snuff in terms of safety, legality, and efficiency, we'll give them a thorough review After we've finished our evaluation, we'll send you a report with our suggestions and a detailed outline of the program we've designed just for you. All of your company's records will be safely archived until destruction is necessary, and then destroyed in accordance with industry standards.
Blue Pencil Is A Great Way To Maintain Order In Your Business Documents
Blue-Pencil's helpful document management services in Canada encourage businesses to grow to new heights. Investment in our strategic partners enables us to provide real value to our customers, not just lip service.
Our Oakville-based company has expanded its document security offerings over the past decade, and it now serves over 6,000 businesses, from startups to Fortune 500s.
We've just recently established two new departments: Document Imaging and Scanning Solutions and Document Storage and Records Management. This enables us to provide end-to-end strategies for managing information security. Please visit this page for a complete list of the cities outside of the Greater Toronto Area that we serve. Get in touch with us right away if you're interested in finding out more about who we are and what we can do for you.
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