When it comes to managing the affairs of a deceased individual, one important aspect is determining how long to keep income tax records. In Canada, the Canada Revenue Agency (CRA) has specific guidelines on record retention for deceased individuals. These guidelines are in place to ensure that the tax obligations of the deceased are properly fulfilled and that any potential audits or investigations can be conducted if necessary.
The basic rule for keeping income tax records after a person’s death in Canada is six years from the end of the taxation year to which the records pertain. This means that if the deceased individual passed away in 2021, the tax records for the year 2020 and previous years should be kept until the end of 2026. It’s important to note that this six-year period is often referred to as the “normal reassessment period” and it represents the timeframe during which the CRA can reassess a taxpayer’s return if there is a suspicion of error or fraudulent activity.
It is advisable to keep all supporting documents related to the deceased individual’s income tax returns, including T4 slips, T5 slips, receipts, statements, and any other relevant documentation. These records can be useful for several reasons. Firstly, they can be used to file any outstanding returns or make any necessary adjustments in the event of a reassessment by the CRA. Secondly, they can serve as evidence to support any claims or deductions made on the tax returns. Lastly, they can be required in case of an audit or investigation.
In some cases, it may be necessary to keep income tax records for a longer period of time. For example, if a deceased person’s tax return includes losses that can be carried forward to future years, it is important to retain the records of those losses until they are fully utilized or expired. Additionally, if the estate of the deceased is complex and includes assets subject to capital gains tax, it may be prudent to keep the related records for a longer period of time in order to accurately calculate the gains or losses when the assets are eventually sold.
It is worth mentioning that there are instances where the CRA may request tax records beyond the normal reassessment period. This can occur if there is suspicion of fraud, tax evasion, or if the deceased individual’s tax return is part of an ongoing court case. In such cases, it is crucial to retain all relevant records until the CRA’s request is resolved or until the court case is closed.
It’s also important to acknowledge the digital age we live in. With the advancement of technology, many individuals choose to keep their records in electronic format rather than physical copies. In this case, it is essential to ensure that the electronic records are properly secured and accessible when needed. This can be achieved through encrypted storage methods, regular backups, and organized folders or drives.
In conclusion, it is recommended to keep income tax records of a deceased person for at least six years from the end of the taxation year to which the records pertain. This timeframe allows for any necessary adjustments, filing of outstanding returns, and potential reassessments by the CRA. However, certain circumstances may require keeping the records for a longer period, such as carrying forward losses or complex estates with capital gains tax implications. It is important to remain organized and retain all relevant records in case of future audits, investigations, or CRA requests.
