Retention of tax information

This post is specific to Canadian and Quebec Personal tax returns only. There are specific circumstances which require different retention periods. Existing clients may contact if they have a specific situation which is different.

In Canada, retention of tax papers will depend on the date that the associated Notice of Assessment or Notice of Reassessment has been issued.

General Rule

In general, you need to keep the papers for six years AFTER the date of the last assessment or reassessment. I refer to this as the seven year rule. That is, for a 2020 T4 slip, you keep until December 31, 2027, which is the end of the calendar year that is six years after the date of the Notice of Assessment, if it is issued normally. It is possible that you delay filing or there is another delay which caused your Notice to be deferred issuing until a subsequent year.

Please notice that, if you are reassessed, this may result in a longer retention period. For example, if your 2020 return is assessed in 2021, then reassessed in 2022 (the subsequent year), then your retention is extended accordingly.

This covers most individuals resident within Canada.

Exceptions to the General Rule

The following items will have exceptions to the general rule above.

  • Execution of a Carry-Back from a Subsequent Year to a Prior Year – In Canada and Quebec, there are occasions where a carryback may modify a prior year. In this instance, the Prior Year would be Reassessed and a Notice would be issued. The reassessment will extend the retention period for the prior year’s return that was changed.
  • Execution of a Carry-Forward from a Prior Year to a Subsequent Year – In some circumstances, the CRA may request proof of the Carry-Forward claim, though this is extremely rare and may actually fail if challenged in some instances within the courts. Accordingly, you would need to retain the records for the prior year’s return which gave rise to the opportunity for the Carry-Forward.
    • Example: In 2009, Nortel declared bankruptcy and your shares, bought in 1998, became worthless. You declared the loss of those shares in 2009, the year of bankruptcy. In 2026, you have an opportunity to use the unused loss from 2009 on your 2025 tax return. If the CRA asks for proof of the claim on your 2025 return pertaining to the Nortel loss, you will need proof of your purchase of the Nortel Shares in 1998 and your subsequent declaration on your 2009 tax return.
  • Proof of Payments – Retain for one year after confirming receipt of the payment with the tax department. (This is not mandated by the act, but is a good practice. However, most people tend to throw out the payment advice documents that the bank issues when you make your payment.)
  • Elections and proof of filing of Elections – Review the election to determine what is the associated tax rule that is affected, and base the retention on that,
  • Purchase of capital assets and other items subject to capital gains including stocks, bonds, mutual funds, etc. – Retained using the tax return which pertain to when the item is sold,
    • Example: You bought WYZ Common Shares in 1998. In 2007, you changed investment firm. In 2024, you sold WYZ Common Shares. You need to keep your paperwork from 1998 for WYZ until December 31, 2031 as it is tied to the 2024 tax return.
      Sidebar: It is your responsibility to keep the original purchase papers for the 1998 purchase. Note that when you changed your investment firm in 2007, your new investment firm would not have received the original paperwork from the purchase in 1998.
  • Principal Residences, Principal Residence Elections, other immovables, and real property – Require extended retention periods for the purchase and sale thereof, based on the particulars of that specific situation. This requires a consultation for your particular circumstance.

These exceptions are not complete, but provide you with some direction. Note that some of the above have no basis in the Act, but my experience has suggested that the retention is needed.

Override Rule

If you are or were creative with tax rules and regulations, you may wish to retain the information for a longer period than is given in this post.

In conclusion…

Note that your particular situation may require a different retention period than the ones listed above. Please check with your tax preparer or accountant who is familiar with your situation to provide you with specific advice personalized for you.

Pandemic Health Protocols

For the immediate future, we will be continuing to maintain the health protocols that we started following in the Spring of 2020. That is, face masks are to be used for in-person pick up or drop off, with the mask covering both the nose and the chin. Any in-person meetings will have to take place outdoors, as we do not have appropriate ventilation inside the office.

Clients may make use of various electronic service options. All of these offer comparable service to in-person appointments without any risk of infection from contagious diseases. If there are counter-indications for your particular needs (such as a requirement for a physical signature,) we also offer additional alternative delivery mechanisms and are happy to recommend those options. Please feel free to discuss with us about your needs and concerns.

In Mid-October 2021, when we complete moving into our new office, we will evaluate if the protocols require further revision.

Advanced Tax Returns

For clients who have prepaid for a 2021 Advanced Tax Return (included in the Tax Reduction Plan), the initial release of the 2021 planner was just issued.

Clients who have prepaid for a 2021 Advanced Tax Return may now start gathering their records at this time. However, the accuracy is limited as not all legislative changes are known at this time. It remain possible that Federal or Provincial Budgets will change some rules.

In general, I recommend waiting for obtaining your Advanced Tax Return until later in the fall. By default, should you not already have obtained this service by the end of October (or when the Federal Government issues its budget, whichever is first,) you will receive a reminder email at that time.

CRA now requiring Two Factor Authentication

The CRA is now requiring taxpayers to use Two Factor Authentication (2FA) in order to log into their computer systems.

The version of 2FA that the CRA uses is based on SMS or VoiceCall to a known phone number. That is, they will either text or call you with the access code. If you try to access the account too many times without successfully logging into the account, your account will be locked.

Clients are advised to ensure that their phone number is kept up to date at the CRA as I do not transmit phone numbers to the CRA when I file the tax return.

(Be advised that the 2FA that the CRA is using can be hacked by SIM swapping as well as when you lose your cell phone. Caution is advised.)

My employer is saying that I don’t need the T2200S

I have now heard from a few clients about their employer saying that I don’t need the T2200S to claim my home office expenses. Is that correct?

There are a couple of points that I would like to make about employers telling their employees that they don’t need the T2200S.

One, the employers do not have the right to instruct their employees on how they are to file the tax return. If they do, they are over-reaching their authority as an employer. No employer has the right to instruct their employees what they are to do outside of work, unless that behaviour reflects badly on the employer. Equally, by doing so, the employer is opening themselves up to being sued by their employees for providing bad advice if the method that the employer wants the employees to use isn’t to the advantage of the employee.

Would you be willing to commit fraud because your employer instructs you to do so?

Two, the CRA requires that you provide the T2200S later, if they then demand the T2200S from the employer to prove that you can claim the deduction. All that they have said that you don’t need the T2200S at the time of filing. They said nothing about requiring it later. They can ask for it up to six years after they issued the Notice of Assessment.

Finally, the CRA has privately indicated to tax preparers that we are required to ask for the T2200S before we file the tax return. Otherwise, they will charge us!

So I recommend that all employees ask their employer for the T2200S automatically if they were moved to working from home due to COVID-19 on or after March 15, 2020.