We are always told to keep records of expenses for tax deductions, but what happens if you don’t keep proper records or lose receipts? Will swarms of police officers flock to your door and place you under immediate arrest?
No, in most circumstances, the CRA denies your deductions and tax credits, reassesses your tax return, and charges you with massive interest on the unpaid taxes – which starts accumulating from the due date of the original tax return, which could create a significant financial burden.
However, failure to keep proper records is an offense under the Canadian Income Tax Act. If CRA suspects that you have knowingly, or under circumstances amounting to gross negligence, made any false statements or omissions, you could be prosecuted. If convicted, you could be fined and even face imprisonment.
Does Everyone Need to Keep Financial Documents?
According to the Canada Revenue Agency (CRA), anybody who files a return is required to preserve their documents in case they need to confirm the income, deductions, or credits they claimed. Thus, it is essential to maintain an organized file of all your financial data, including bills, receipts, invoices, and bank statements.
If you are not organized, dealing with an audit can result in stress, headaches, and additional tax payments. Therefore, it is strongly advised that you use a methodical approach to financial record-keeping and collaborate with a trained accountant to guarantee the accuracy of all your tax filings.
If you have any questions about this article or business taxes, in general, or you want to make an appointment with an accounting professional at Naicker & Associates, please contact us at (604) 469-9369. We are based in Port Moody, BC.
