My family and I moved to the country last month after buying an acreage east of Saskatoon.
There is nothing like a pack and a move to learn something about yourself.
For me it was the simple truth that I am not inclined to throw anything away.
This was reinforced during my last walk through our former home when I checked the attic and discovered financial books and records dating back to 1984.
Books and records must be kept by every person carrying on a business and every person who pays or collects income taxes. “Person” under this part of the Income Tax Act includes corporations and trusts.
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Books and records must be kept for a minimum of six years from the date the tax return was filed.
For example, let’s assume a farmer with a Dec. 31 year end filed his 2002 tax return in April 2003. In April 2009, he has passed the minimum six-year test and is no longer obligated to keep his 2002 books and records.
However, some documents should be kept indefinitely, including records and supporting documents concerning the acquisitions or disposal of property, the share registry and any other historical information that would have an impact upon the sale or windup of the business.
While the Income Tax Act requires all persons to keep records and books of account, they do not specify the exact form of this information. To most people, books of account mean ledger books or computerized records in which the operations and transactions of the person’s business are recorded in monetary terms and that form part of the accounting system.
Records are documents that support and serve as evidence for the relevant accounting entries.
The Canada Revenue Agency in its circular IC 78-10R4 available at www.cra-arc.gc.ca provides a long list of source documents that should be retained: sales invoices, purchase invoices, cash register receipts, formal contracts, credit card receipts, delivery slips, deposit slips, work orders, dockets, cheques, bank statements, tax returns and general correspondence, whether written or in any other form, including accountant working papers.
How much is enough? That may depend on the nature and size of the business.
It is generally agreed that the CRA wants to ensure that the books and records are sufficient to support the taxpayer’s filing position when determining and reporting his income.
If the agency finds that the books and records are inadequate, it will request that the books and records be brought up to a satisfactory standard.
If this isn’t done, the CRA will issue a formal requirement letter, which will also describe the legal consequences and penalties for failing to comply.
These penalties will be either imprisonment or a fine of not less than $1,000.
Tax and AgriStability disputes will generally be won or lost on the relevant facts, and those facts are most likely to be found in the farmer’s books and records. When or if an audit occurs, it is clearly in the interests of all producers to ensure that their farm books are thorough and organized and that their records support their determination of income.
What did I do with my pre-2003 books and records? I moved them to our acreage by van and, on my wife’s suggestion, from the van to a sled.
I then hauled them to a trappers’ tent that we put up on our acreage this past summer. This tent is equipped with a wood stove that now has loads of kindling. I plan on burning these records with nostalgia, remembering the good and not-so-good years of farming.
Allyn Tastad, certified general accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon, at 306-653-5100. He is also involved in the family farm near Loreburn, Sask.
