Entrepreneurship & Small Business

CRA say they are missing my tax return from 1994 to 2002

  • Last Updated:
  • Nov 6th, 2019 7:34 pm
[OP]
Sr. Member
Oct 22, 2016
679 posts
578 upvotes
Comox Valley

CRA say they are missing my tax return from 1994 to 2002

Need some advice here please on CRA, and a Business account on a company I have shut down this past summer.

Background here, is I have a couple Limited Companies in Canada, for the past 30 years. The larger ones were a Roofing Company, and I had a smaller one (which is the one involved here) which I incorporated in 1994. I failed to get this smaller one active, and did not file tax returns for 1994 to 2002, as it was not operating. In that year 2002, I re- activated this company, and used it for rentals income on a residential house I had.

This summer I shut down this company. Reason why is at 60 years old, I am going to retire. In doing this the company was been closed by voluntary dissolution in BC, and final tax return filed with CRA. With this, there is not a concern with the dissolution, or final return.

The problem is I have a Credit Balance of $2,800 with CRA in this Limited company. The credit came because I overpaid on the taxes due on it this year.
CRA does not want to give me back this $2,800 because they have advised me the following, in 2 different phone calls I made with them.

• Because this company was activated 12 days into our fiscal year, in 2002. They do not have a return for this 12 day period in 2002. They do have returns from year 1994 up to this 12 day period missing in 2002.
• Second call they advised me they do not have any returns from the year 1994 to 2002.



These are the problems here.

• CRA since 2002 has never advised me that the tax returns from 1994 to 2002.


So what the heck do I do here?

Thanks beforehand.
Last edited by User452441 on Jan 18th, 2020 10:19 am, edited 1 time in total.
21 replies
Newbie
Oct 29, 2019
2 posts
2 upvotes
Toronto
In my experience dealing with the CRA, you will have to show proof that you had filed the returns.

You can write a letter explaining the situation however without any substantial proof, you risk loosing the credit balance.
Member
Jan 18, 2017
319 posts
238 upvotes
You have two options here:

-- Option 1. Fight with CRA and get them to correct the past 20 years of stuff. Make sure you have a lot of free time, as this process will take about three years. (Just went through this with a client.) Make sure you have copies of all your old tax returns etc.

-- Option 2. Re-file all the missing returns. Yes, these will need to be paper-filed and mailed out to CRA. Send them registered mail. (This Option assumes nil returns/no taxable income for those years. Strictly a compliance filing.)

In my experience, Option 2 is faster and less headache. CRA is so screwed up these days that trying to get a reasonable person to look in to your file to correct a situation like this is like trying to find a needle in a hay stack.

As an aside, you or your accountant log into CRA's client portal (CRA MyBusiness Account) and look at what CRA has on file for the corp in terms of Notice Of Assessments. It'll tell you right away whether you're truly missing 1994-2002, or if it's just the CRA idiot on the end of the phone being an idiot.
______
Canadian & US tax guy (CPA)
Deal Fanatic
Oct 7, 2007
8392 posts
4354 upvotes
crossborderguy wrote: You have two options here:

-- Option 1. Fight with CRA and get them to correct the past 20 years of stuff. Make sure you have a lot of free time, as this process will take about three years. (Just went through this with a client.) Make sure you have copies of all your old tax returns etc.

-- Option 2. Re-file all the missing returns. Yes, these will need to be paper-filed and mailed out to CRA. Send them registered mail. (This Option assumes nil returns/no taxable income for those years. Strictly a compliance filing.)

In my experience, Option 2 is faster and less headache. CRA is so screwed up these days that trying to get a reasonable person to look in to your file to correct a situation like this is like trying to find a needle in a hay stack.

As an aside, you or your accountant log into CRA's client portal (CRA MyBusiness Account) and look at what CRA has on file for the corp in terms of Notice Of Assessments. It'll tell you right away whether you're truly missing 1994-2002, or if it's just the CRA idiot on the end of the phone being an idiot.
I like to learn from others' experiences and now I have a question about purging/destroying records.

I believe CRA tells us to hang on to our records for six complete years and that after this we should be okay with destroying our old records. I have been holding onto mine for almost 20 years now because I am always a bit nervous about destroying stuff. However, space is precious and I was thinking of destroying some of the older records now to start freeing up some space. But what does the OP story tell us? That if we destroy our records we might find ourselves having to go back 20 years to find something that we may have shredded along the way? If OP tells the CRA that he destroyed these records because he didn't think they were needed anymore, how does he recover from that? The CRA's response to the OP is troubling. Not sure what to make of CRA's record retention policy.
[OP]
Sr. Member
Oct 22, 2016
679 posts
578 upvotes
Comox Valley
crossborderguy wrote: As an aside, you or your accountant log into CRA's client portal (CRA MyBusiness Account) and look at what CRA has on file for the corp in terms of Notice Of Assessments. It'll tell you right away whether you're truly missing 1994-2002, or if it's just the CRA idiot on the end of the phone being an idiot.
I did log on their, and the records CRA has for me their, goes back to 2015.

I appreciate your thoughts, and other posts on this. It does help me out on this.

I wrote them a letter, asking them what returns they do not have. Reason for this is I prefer to have it on paper, and I did receive 2 different answers in phone calls to them.
Member
May 29, 2004
457 posts
123 upvotes
I thought you only keep your records up to 5 yrs. unless that only for proprietorship since that what HR Block reminds me after I'm done with my filing each year.
Banned
Aug 23, 2019
897 posts
456 upvotes
hold up...
common business practice for record retention is 7 years.
this is standard industry practice.

wtf?
Deal Addict
Nov 10, 2018
4068 posts
4262 upvotes
I am NOT a tax lawyer. However, please review:

1) https://www.canada.ca/en/revenue-agency ... early.html
2) Take a look at Canlii. Pay particular attention to this:

The CRA can demand that you produce records outside of the period of retention. - just like how I can demand that you pay me $1 million by tomorrow. However, just because I or the CRA demands you does not mean you need to comply. You may have to take it to the Tax Court of Canada and submit your case to a Judge but this is a pretty clear case to me.

CRA: "Prove you filed taxes for year A, B, C"
You: "I don't have those records anymore as I am not required to keep them" (if that's the case. review #1 above in detail.)
CRA: "*#$(@"

If they want to take this further and prove gross negligence or whatever, then that's on them. Heck, those tax years in question are already statute barred anyways. The burden of responsibility is now on the CRA to prove gross negligence if they want to try that.

This is a very peculiar case however in my dealings with the CRA they are rarely reasonable until one appeals the whole thing.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Deal Fanatic
Oct 7, 2007
8392 posts
4354 upvotes
angryaudifanatic wrote: I am NOT a tax lawyer. However, please review:

1) https://www.canada.ca/en/revenue-agency ... early.html
2) Take a look at Canlii. Pay particular attention to this:

The CRA can demand that you produce records outside of the period of retention. - just like how I can demand that you pay me $1 million by tomorrow. However, just because I or the CRA demands you does not mean you need to comply. You may have to take it to the Tax Court of Canada and submit your case to a Judge but this is a pretty clear case to me.

CRA: "Prove you filed taxes for year A, B, C"
You: "I don't have those records anymore as I am not required to keep them" (if that's the case. review #1 above in detail.)
CRA: "*#$(@"

If they want to take this further and prove gross negligence or whatever, then that's on them. Heck, those tax years in question are already statute barred anyways. The burden of responsibility is now on the CRA to prove gross negligence if they want to try that.

This is a very peculiar case however in my dealings with the CRA they are rarely reasonable until one appeals the whole thing.
Thanks for putting things into perspective. Based on what you are saying here, taxpayers should not feel like they have to keep records outside of the records retention period as defined by the CRA's own policy. I understand that there are always exceptions to these rules such as in the cases where they suspect fraud, etc. but is it really reasonable in the OP's case to produce records of taxes submitted from over 25 years ago? Keeping that much paper in your basement could be a fire hazard.
Deal Addict
Nov 10, 2018
4068 posts
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choclover wrote: Thanks for putting things into perspective. Based on what you are saying here, taxpayers should not feel like they have to keep records outside of the records retention period as defined by the CRA's own policy. I understand that there are always exceptions to these rules such as in the cases where they suspect fraud, etc. but is it really reasonable in the OP's case to produce records of taxes submitted from over 25 years ago? Keeping that much paper in your basement could be a fire hazard.
The CRA does not care what is a fire hazard. Moreover, companies in general destroy records if they are no longer obligated by law to keep them. Banks, as an example, shred statements of its customers after the 7 year mark - in fact, call up your FI/bank and ask them just that. They typically destroy records 7 years, to the month!

The Income Tax Act is clear when it comes to what must be retained and for how long. Outside of the CRA requesting you keep specific records for however long they ask you to, you're well within your right to destroy them.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Sr. Member
Nov 12, 2014
918 posts
611 upvotes
Kingston, ON
angryaudifanatic wrote: The CRA does not care what is a fire hazard. Moreover, companies in general destroy records if they are no longer obligated by law to keep them. Banks, as an example, shred statements of its customers after the 7 year mark - in fact, call up your FI/bank and ask them just that. They typically destroy records 7 years, to the month!

The Income Tax Act is clear when it comes to what must be retained and for how long. Outside of the CRA requesting you keep specific records for however long they ask you to, you're well within your right to destroy them.
Just need to know what you're destroying....we have plenty of clients where we need their corporate records back to date of incorporation to make certain tax calcs....if they've destroyed them, we're in trouble.
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Mar 3, 2018
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GTA
QN5252 wrote: Just need to know what you're destroying....we have plenty of clients where we need their corporate records back to date of incorporation to make certain tax calcs....if they've destroyed them, we're in trouble.
I have seen corporate tax records back to 1917 that were being saved. Again as you mentioned for tax calculations. I remember an undistributed income on hand calculation that was needed at one point going back to the date of incorporation.

CRA requires tax records to be held six years. Although written permission can be obtained to destroy records sooner.
Deal Fanatic
Oct 7, 2007
8392 posts
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DaveTheDude wrote: I have seen corporate tax records back to 1917 that were being saved. Again as you mentioned for tax calculations. I remember an undistributed income on hand calculation that was needed at one point going back to the date of incorporation.

CRA requires tax records to be held six years. Although written permission can be obtained to destroy records sooner.
I'm confused. Are you saying that we should keep our corporate tax records for longer than six years because we might need them in the future to perform certain tax calculations OR do we just follow the CRA's record retention policy and feel free to destroy anything after the six years are up?
Deal Addict
Mar 3, 2018
2053 posts
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GTA
choclover wrote: I'm confused. Are you saying that we should keep our corporate tax records for longer than six years because we might need them in the future to perform certain tax calculations OR do we just follow the CRA's record retention policy and feel free to destroy anything after the six years are up?
I would keep all corporate tax returns, schedules and any working papers indefinitely. Should be small folder each year. You never know when a current year transaction will need to be substantiated by prior year tax information. Like assets you were claiming CCA on for 15 years are sold. Or in the OP’s case CRA comes back years later requesting information to approve your refund request.

This is not to be confused with keeping bulky accounting records like invoices and receipts. Those are usually destroyed after the six year period. Sooner if CRA approves your request to do so.
Deal Fanatic
Oct 7, 2007
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DaveTheDude wrote: I would keep all corporate tax returns, schedules and any working papers indefinitely. Should be small folder each year. You never know when a current year transaction will need to be substantiated by prior year tax information. Like assets you were claiming CCA on for 15 years are sold. Or in the OP’s case CRA comes back years later requesting information to approve your refund request.

This is not to be confused with keeping bulky accounting records like invoices and receipts. Those are usually destroyed after the six year period. Sooner if CRA approves your request to do so.
Got it, thanks.

So, from what you are saying, keeping corporate tax returns as long as possible is a good idea but the source documentation including the invoices and receipts to substantiate such transactions are okay to destroy after the six year period EVEN THOUGH they might be the only proof one has to substantiate them for your working papers and/or returns. I am assuming you are thinking that in the event of an issue with the CRA that they will ACCEPT the working papers as sufficient proof for the transactions in question WITHOUT having to supply the source documentation such as the receipts, payables, invoices, cheques, etc. that go along with the same. Not trying to be cheeky, just trying to understand what is acceptable to the CRA.
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Mar 3, 2018
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choclover wrote: Got it, thanks.

So, from what you are saying, keeping corporate tax returns as long as possible is a good idea but the source documentation including the invoices and receipts to substantiate such transactions are okay to destroy after the six year period EVEN THOUGH they might be the only proof one has to substantiate them for your working papers and/or returns. I am assuming you are thinking that in the event of an issue with the CRA that they will ACCEPT the working papers as sufficient proof for the transactions in question WITHOUT having to supply the source documentation such as the receipts, payables, invoices, cheques, etc. that go along with the same. Not trying to be cheeky, just trying to understand what is acceptable to the CRA.
Well in the perfect world to cover every possible situation one would keep all records indefinitely. Generally though CRA never requests source documentation like expense invoices beyond the statue barred period (3 or 4 yrs depending on corp type) unless misrepresentation is evident or a waiver was filed.

The keeping of old working papers and schedules is for your reference. Like in case you have a dispute with CRA on how they calculated a tax balance. For example CRA’s current year UCC balance on a long held asset may be different from yours.
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Oct 7, 2007
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DaveTheDude wrote: Well in the perfect world to cover every possible situation one would keep all records indefinitely. Generally though CRA never requests source documentation like expense invoices beyond the statue barred period (3 or 4 yrs depending on corp type) unless misrepresentation is evident or a waiver was filed.

The keeping of old working papers and schedules is for your reference. Like in case you have a dispute with CRA on how they calculated a tax balance. For example CRA’s current year UCC balance on a long held asset may be different from yours.
Makes sense, I think.

I suffer from not being able to throw things away because it is always seems like when I finally do discard something, it is only a few days later that I find out I needed it. I think for now I will continue to leave my records since the beginning of incorporation as is. I have approximately 20 years' worth of every single stitch of paper, every receipt, etc. BUT I know at some point, I will need to discard this stuff. It is neatly organized into folders by transaction type and then stacked in Bankers Boxes so selectively destroying records should be relatively easy when the time comes. These CRA stories that RFD posters share can be quite interesting. Nothing like learning from others' experiences.
Member
Jan 18, 2017
319 posts
238 upvotes
Sorry for the late reply.

Basically the trick to document retention as it relates to CRA involves two key points:

1. Your tax years are only statute-barred as long as you have filed a tax return and have the tax assessment for that year. Key thing to know is that if you don't file, CRA can go back and review that year whenever they feel like. You need to have a Notice Of Assessment for those years.

2. Historical information used for tax calcs is important to have support for. Say you sell a building for a big capital loss. CRA may want to see where you get your cost basis from (ie. building purchase price.) on the chance that they could disallow the loss. So any time we calculate capital gains/losses, or certain tax elections, we try to dig up historical records.

Basically what we suggest clients do is keep "regular" business records for 7 years, then shred. Separately, keep a "Permanent File" box that has tax records/assessments, along with important legal docs like your minute book, as well as any big asset purchase/sale docs. Keep the Permanent File box around until the end of time.

choclover wrote: Makes sense, I think.

I suffer from not being able to throw things away because it is always seems like when I finally do discard something, it is only a few days later that I find out I needed it. I think for now I will continue to leave my records since the beginning of incorporation as is. I have approximately 20 years' worth of every single stitch of paper, every receipt, etc. BUT I know at some point, I will need to discard this stuff. It is neatly organized into folders by transaction type and then stacked in Bankers Boxes so selectively destroying records should be relatively easy when the time comes. These CRA stories that RFD posters share can be quite interesting. Nothing like learning from others' experiences.
______
Canadian & US tax guy (CPA)
Deal Fanatic
Oct 7, 2007
8392 posts
4354 upvotes
crossborderguy wrote: Sorry for the late reply.

Basically the trick to document retention as it relates to CRA involves two key points:

1. Your tax years are only statute-barred as long as you have filed a tax return and have the tax assessment for that year. Key thing to know is that if you don't file, CRA can go back and review that year whenever they feel like. You need to have a Notice Of Assessment for those years.

2. Historical information used for tax calcs is important to have support for. Say you sell a building for a big capital loss. CRA may want to see where you get your cost basis from (ie. building purchase price.) on the chance that they could disallow the loss. So any time we calculate capital gains/losses, or certain tax elections, we try to dig up historical records.

Basically what we suggest clients do is keep "regular" business records for 7 years, then shred. Separately, keep a "Permanent File" box that has tax records/assessments, along with important legal docs like your minute book, as well as any big asset purchase/sale docs. Keep the Permanent File box around until the end of time.
Great advice. Thanks for sharing your perspective.

What would you consider to be "big asset purchase" in terms of dollars or nature aside from real estate?
Member
Jan 18, 2017
319 posts
238 upvotes
It's hard to answer that, as the question relies heavy on "materiality". So for a small business, a $500k contract might be a huge sum of money. For Google, $500k is a rounding error. So (like usual) the answer is "it depends."

If I had to put an answer to it, I would basically say keep paperwork on any buildings and real estate purchases, vehicles, big $ computer purchases (not your iPad), and anything used for SRED credits. Leasehold improvements are another. Big repair bills for the buildings too.

Basically, just think to yourself "If CRA wanted to review this transaction down the road, how big of a gongshow will it be if I don't have the paperwork handy to support my position." So for a $500 ipad, who cares - the tax risk is all of $50. But a $50,000 roof repair to a commercial building, or a $500,000 building purchase, well those numbers make a big difference to an average business.

In conclusion, err on the side of caution. And if physical storage is a problem, buy a ScanSnap scanner and scan all the paperwork in your bankers boxes to PDF's, and store copies in three different places. (ie. Dropbox/cloud, USB stick stored at one location , and a USB harddrive at a different location).
choclover wrote: Great advice. Thanks for sharing your perspective.

What would you consider to be "big asset purchase" in terms of dollars or nature aside from real estate?
______
Canadian & US tax guy (CPA)

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