Just How Long do You Have to Keep Those Tax Receipts in Your Closet?

An experienced advisor in the industry seemed to hit it on the head last week, when he declared May first as the start of the next phase of tax season ó adjustment and audit season! When it comes to taxes, it's not only about getting those returns filed on time, but most importantly, it's about storage and retrieval! The "ff-season"is fraught with the potential for tax audit activity by CRA and the need to adjust returns for omissions, missed slips, and of course, the inevitable errors made during the rush!

What should you do if you missed an important provision or document? Most advisors will tell their clients to come back and see them immediately upon discovery They will also cover an important technique in avoiding expensive gross negligence or tax evasion penalties: voluntary compliance (you tell CRA about errors or omissions before they tell you, on that off chance that you overstated deductions or credits, or understated income.)

The following filing milestones should also be noted to answer these and other questions about tax compliance responsibilities all year long:

Adjusting a return to correct an error or omission: 10 years following the end of the relevant taxation year.

Appeals with the Tax Court:

  • No later than 90 days from the date of mailing of a Notice of Reassessment or confirmation of an assessment
  • No earlier than 90 days following the date of mailing of a Notice of Objection, if CRA has not responded to the Objection

Collection of taxes owing:

  • Generally, 10 years from the date of assessment. A collection action cannot generally be undertaken until 90 days after the relate Notice of Assessment or Reassessment has been mailed
  • Where a Notice of Objection has been filed, or an appeal has been made to the Tax Court, collection of the tax debt will be suspended until the dispute is finalized

Filing Deadlines: Final Returns of Deceased Taxpayers:

  • Where the individual dies before October, April 30 or June 15 (the normal filing deadlines
  • Where the individual dies after September, 6 months following death
  • To defer payment of income tax by making up to 10 equal consecutive annual payments: first instalment must be paid on or before the day on which payment of tax was otherwise payable.

Filing Deadlines: Trust Returns

  • March 31 for inter vivos trusts
  • No later than 12 months following death for testamentary trusts, and annually thereafter

Filing Deadlines: Corporations: 6 months following the end of the taxation year

Instalment Payments: Corporations: On or before the last day of each month

Objection to a Notice of Assessment or Reassessment:

  • Generally, 90 days from the date of mailing of the Notice
  • Individuals and testamentary trusts can file within one year of the due date of the related return

Record retention, Individuals: Generally, six years from the end of related taxation year.

Record retention, Corporations: Permanent corporate records must be retained for two years following dissolution

Registered investments: Manage registered investment accounts around these milestones:

Contributions, RRSP: During the calendar year or within 60 days of the year end

Deduction, Refund of Unused RRSP Contributions: Form T746, with tax return filed for the year in which amounts were withdrawn.

Penalty for Excess Contributions: For 2007contributions, Form T1-OVP by by March 31, 2008.

Refunds from the CRA:

  • Generally, three years from the end of the related taxation year.
  • However, individuals and testamentary trusts can apply for refunds for up to ten years following the end of the related taxation year.
  • Where the application for a refund reflects a loss carryback, the application period is generally extended to six years, and to seven years for corporations that are not Canadian controlled private corporations

Refunds, Overdeducted CPP or EI Premiums: File separate from PD24 for each worker with T4 information return within the following time limits:

  • CPP Contributions: no later than 4 years from end of year in which overpayment occurred
  • EI Premiums: no later than 3 years from end of year in which overpayment occurred

For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

Next time: Low hanging Fruit: Let Carry-Over Provisions Ripen for Tax Season 2008