We live in a digital world where everything is captured electronically in real time. Paper financial statements have become relics from the past; unfortunately, the requirement to produce evidence for the Canada Revenue Agency (CRA) for HST or income tax has not.
The CRA accepts records in:
• paper format
• paper format later converted to and stored in an accessible and readable electronic format
• an accessible and readable electronic format.
As explained on the CRA website, Keeping Records: “We consider you to have electronic records if you create, process, maintain, and store your information in an electronic format. You are required to retain these records in an electronically readable format, even if you have paper printouts of these records. If any of your source documents are initially created, transmitted, or received electronically, they must be retained in an electronic format. Scanned images of paper documents, records, or books of account that are maintained in electronic format are acceptable if proper imaging practices are followed and documented.” (Canada Revenue Agency, Keeping Records, https://www.capacitycanada.ca/wp-content/uploads/2014/09/CRA-Record-Keeping-Guidlines.pdf)
For complete details of what is required, see Information Circular IC78-10R5, Books and Records Retention/Destruction, and GST/HST Memorandum 15.1 General Requirements for Books and Records and Canadian General Standards Board (CGSB) publication, CAN/CGSB 72.11 Microfilm and Electronic Images as Documentary Evidence, and its latest amendment.
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Orderly Fashion
Both corporate and individual tax payers should be aware of the following:
1. Records must be kept at your place of business or residence. They may not be kept outside Canada unless you receive CRA permission. This suggests that Cloud accounting to servers outside Canada does not meet the CRA's criteria and that businesses need to keep the general ledger in CSV (comma-separated values) or PDF format on their own computers.
2. Bank statements and credit card statement amounts, with the exception of bank charges and overdraft interest, will not satisfy the CRA. Original source documents that support e-transfer, cheque or deposit information are required.
3. Payments of credit card balances are often lumped together with other expenditures when payments are made to the credit card company. In the event of a review, not only will you be required to produce the statements, you will have to produce the backup (i.e., invoices) for amounts shown on the credit card. Thus, original purchase invoices will be required.
4. Receipts for debit card purchases for small items are often discarded. Without an original source document, these expenditures may be disallowed by the CRA.
5. Accounting programs are available that attach the original electronic invoice to the specific purchase or sale. This is helpful when backtracking to the original electronic invoice. But what about purchases made off the business premises? Documents for these purchases should be scanned or photographed and placed into an appropriate folder that establishes the date of the transaction, the amount, and a description of the item(s). If using PDF software, indicate the journal entry on the PDF so that a review of the general ledger can quickly source the document.
Keep all original copies in case of a lawsuit
Retention of Legal Documents
Documents such as purchase contracts, financing covenants, shareholder agreements, etc., should be scanned and saved in perpetuity. Hard copies of such documents should also be kept because the original source document will be required in the event of a lawsuit.
Since source documents must be maintained for a minimum of six years, it is advisable to:
• ensure all records are electronically copied to an external hard drive stored off-site
• back up data to a local offsite facility or the Cloud as well as an external hard drive
• ensure data is stored in a format useful if you need to produce historic financial records. Because some software providers can only provide backup of financial data in CSV, charts, formulas, row styling, images, and other presentations will not be forthcoming when using a CSV data dump.
• back up on a regular basis. Software is available that will automatically back up data as frequently as you need.
• ensure that a new computer, software or operating system will allow updating of the old database. It may be advisable to hold onto the older computers to ensure access to old records if required. Ensure that all old passwords are stored with the old devices.
• ensure computers used in discontinued operations are not discarded and data stored in the Cloud is recovered and stored on an external hard drive and/or payments for the Cloud service are maintained.
Failure to record and retain records properly can be costly. Consider this: if a business spends $1,000 and does not have the supporting receipt, not only has the business lost the income tax deduction, it has also lost the ITC charged on the purchase. Self-employed individuals in Ontario could lose $430 if they are in a 30% tax bracket and entitled to an ITC of 13%. An incorporated business would suffer similar losses in tax advantage and ITC refund, depending on the business’s province or territory.
Check Your Record Keeping with Your CPA
Your CPA understands the need for record retention to satisfy not only business needs but also CRA requirements. Your chartered professional accountant should review your accounting and record-keeping system to determine whether improvements could be made to ensure your business is ready and able to provide the information required in a CRA review. |
Cryptocurrencies, such as Bitcoin, Ether and Litecoin, are digital mediums of exchange that use cryptography for security. Different cryptocurrencies can be used in different ways. Some may be used as a way to purchase goods or conduct business online.
Cryptocurrencies are not issued or backed by a central bank or monetary authority. Some cryptocurrencies, particularly those offered in initial coin offerings (ICOs) and initial token offerings (ITOs), may be subject to securities regulation in Ontario.
Most cryptocurrencies are bought and sold through online trading platforms, commonly called cryptocurrency “exchanges”. Users can buy, sell or exchange cryptocurrencies for other cryptocurrencies or conventional money, like dollars, often for a fee.
Cryptocurrency trading platforms operate around the world. These platforms may be susceptible to fraud, market manipulation and cyberattacks. Some users have reported difficulties converting cryptocurrencies to conventional money as some platforms may not have enough cash on hand to meet withdrawal requests.
Before you consider buying cryptocurrencies, understand the risks, including:
(1) High volatility – cryptocurrencies are prone to large swings in market value – you could stand to lose some or all of your money.
(2) Lack of oversight – without regulation and oversight, you may be left with few options if something goes wrong. ICOs and ITOs may be subject to securities regulation. When in doubt, contact the Ontario Securities Commission at 1-877-785-1555.
(3) Risk of fraud – some fraudsters have tried to capitalize on cryptocurrency interest by creating new scams, or by rebranding existing scams like binary options.
You can learn more about cryptocurrency and how to protect your money by visiting GetSmarterAboutMoney.ca/Crypto, the Ontario Securities Commission’s award-winning investor education website. You’ll also find unbiased information about investing and resources to help you make informed investment decisions. |
Mahatma Alfred Ramjeet celebrated his 93rd birthday recently with a prayer service at the Arya Samaj/Vedic Cultural Centre, which he and his family attends regularly. He is full of energy and has a sharp mind evidenced by the fact that he walked up independently to the stage with no external support and delivered a sermon demonstrating his profound knowledge of the scriptures.
Uncle Al, as he is affectionately called, told ICW that he loves his Indian name but added a Christian name to allow him greater job opportunities as "in those days" you had to be a Christian to get Government jobs and other big positions. He did not become a Christian but he adopted a Christian name to enhance his chances of employment. He is a qualified Radio and Electronics Technician and worked in that capacity at Baichandeen’s Electronic store in Guyana for several years.
He and his family migrated to Canada in 1981 and worked with his son who had a workshop servicing TV’s, Radios, Refrigerators and other electronic devices. He is well supported by his 86-year-old wife, Sukhdeia Ramjeet, who also worked for over 15 years at Imperial Fether Corporation while in Canada. They are now in their 65th year of a very happy marriage and had nine children. They unfortunately lost their 58 year-old daughter, Shanti, last year. They also have 16 grandchildren and eight great grandchildren.
They are presently in Florida where they went to celebrate the marriage of their granddaughter. They will be spending the rest of winter there. |
