Tax Season Prep: What Kind of Business Records to Keep, and How Long to Keep Them

UPDATE (November 8, 2024): This article has been updated to reflect changes in legislation, regulations, and accounting practices since the date of publication (September 9, 2022).

As we enter the final stretch of the year, you might be starting to look ahead to tax season and making sure your business documents are in order for a tidy filing process. While you take a look through your records, it’s a good idea to refresh yourself on what documents you need to keep and for how long.

Types of records

The CRA states that the business documents you are required to keep as records include all transactions that support your income and expenses. These commonly include, but aren’t limited to:

• Income records (e.g., contracts, receipts, fee statements, bank statements, and deposit slips)
• Expense records (e.g. invoices, credit card receipts, cheques), which must show:
  • The date of the purchase;
  • The name and address of the seller or supplier;
  • The name and address of the buyer;
  • The full description of the goods or services (note this yourself if not provided); and,
  • The vendor’s business number if they are a GST/HST registrant
• Property records from sale or trade of a property, which must show:
  • The date sold/traded
  • Who it was sold/traded to; and,
  • The amount of payment or credit from the sale/trade

How long to keep them

Generally speaking, the CRA requires you to keep all records and supporting documents for a minimum period of six years from the end of the last tax year they relate to. If the records relate to long term investments or capital assets the records should be kept for a minimum of six years after the investment or asset is sold. 

There are some exceptions in which the CRA would require records to be retained for a different period of time, and if this applies to your situation, a CRA official will contact you either in-person or via registered mail.

Considerations and consequences

Not keeping proper records can result in audits and, in some cases, possible legal action. The CRA may assess a repeated failure to report income penalty of equal to the lesser of:

• 10% of the unreported amount of income for a tax return for the given tax year; or,
• 50% of the difference between the understated tax payable (and certain overstated refundable tax credits) related to the amount you did not report and the amount of tax withheld related to the amount you did not report

If you destroy records earlier than the required retention period without obtaining permission from the CRA via Form T137, you may be prosecuted as well.

If you have any doubt about whether to keep a business document or dispose of it, your DMCL advisor will be happy to advise you on what you need to keep and why so that you’re fully prepared for whatever circumstances may arise.

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