- Keep bank and credit card statements, payroll records, and invoices for six years after the tax year they pertain to, but certain records, like general ledgers and corporate documents, should be kept indefinitely.
- Sole proprietors and incorporated physicians have different record-keeping obligations, especially regarding general ledgers and corporate tax documents.
- Failing to maintain proper records can result in costly penalties and additional taxes during a CRA audit, emphasizing the importance of professional advice.
What Records Do You Need to Keep as a Taxpayer?
- Credit card statements and chits: These are the slips you get when you use your credit card for business expenses. These must be kept for six years from the end of the tax year they relate to.
- Bank statements: Payments made or received related to your practice or personal finances need to be kept for six years from the end of the tax year they relate to.
- Cancelled cheques and deposit records: Keep these for six years from the end of the tax year they relate to. However, records tied to major business or personal expenses may be kept longer.
- General ledgers: If you are practicing through a professional corporation, you are required to maintain a general ledger and retain it indefinitely. General ledgers are not required to be maintained by sole proprietors, or equivalent. (It is important to clarify that while sole proprietors are not required to maintain a formal general ledger, they must keep adequate records to support their tax filings, including detailed financial records like cash receipts, expense reports, and invoices.)
- Invoices (if applicable): Although most physicians are paid for their services through provincial (or territorial) health authority platforms, there may be times when you issue an invoice directly. This could happen if you provide services to a law firm, a private patient (for services not covered under health insurance), or other organizations. Keep these records for six years from the end of the tax year they relate to.
- Payroll records: Whether it’s for a nanny or other household staff, or for employees in your practice, payroll records must be kept for six years from the end of the tax year they relate to.
Personal vs. Corporate Records
Personal Records
- Credit card chits and bank statements: These include expenses related to your practice and personal transactions. Keep these for six years from the end of the tax year they were generated.
- Payroll for nannies or household staff: Maintain payroll records, tax receipts, and other documentation for six years from the end of the tax year they relate to.
- Cancelled cheques and deposit records: Keep these for six years, although it may be prudent to retain them longer if tied to significant financial transactions.
Corporate Records
- Corporate bank statements and credit card records: Keep business-related bank and credit card statements for six years from the end of the tax year they relate to.
- Payroll for staff: If your corporation employs staff, you are responsible for keeping payroll records for six years from the end of the tax year they relate to.
- Corporate documents: Items like minute books, shareholder agreements, and corporate tax returns must be kept indefinitely.
- General ledgers: If you practice through a professional corporation, you must maintain a general ledger indefinitely. These records are essential for supporting future tax audits or financial evaluations.
Records for medical equipment purchases, leasehold improvements or similar capital purchases should be kept for six years after the asset is disposed of or fully depreciated for professional corporations or sole proprietorships.
Why Is Six Years Important?
The Income Tax Act and Excise Tax Act (for those registered for GST/HST) require that you keep most tax-related records for six years from the end of the tax year they relate to. For example, if you have documents relevant to your 2023 tax return, the six-year retention period starts at the end of 2023, meaning you should keep those records until the end of 2029. However, certain records, like corporate documents (tax returns, shareholder agreements, etc.), and records related to long-term assets must be kept indefinitely.
Other Government Bodies to Consider
While the CRA is the main body for tax-related record-keeping, don’t forget about provincial/territorial tax authorities like Revenu Québec, or your province’s Ministry of Finance. They may also have specific rules or record-keeping requirements, especially if you file additional returns for provincial taxes or other regulatory matters.
Can You Keep These Records Digitally?
Yes! Whether you store your records electronically or in hard copy, they must be accessible and readable if the CRA or other tax authorities ask to see them. Ensure any digital records are securely stored and backed up.
Why This Matters
Proper record-keeping isn’t just about following the rules—it protects you in case of a tax audit, helps prevent additional taxes, and keeps your practice running smoothly. The CRA and other authorities take your record-keeping obligations seriously, so make sure you’re compliant to avoid unnecessary stress, penalties, or extra taxes.
About Jonathan Tucker, CPA, CA
At Tucker’s Professional Corporation, Jonathan Tucker leads a dedicated team providing comprehensive tax and accounting services to professionals, including physicians. With years of experience advising clients on corporate and personal tax matters, Jonathan focuses on delivering practical solutions tailored to each client’s needs. His expertise extends to corporate structuring, tax planning, and guiding professionals through complex financial decisions.
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