How long should a Canadian or American keep their

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This question came by phone but I thought it was worthy of inclusion.
The quality of my answer is better for Canadians and it is a little skimpy for Americans so if an American Accountant wants to add to the comment, please feel free and I will, of course, give you credit.
Canadians and Americans who have anything other than a W2 or T4 slip should keep their records for ever, particularly if they are self-employed.  
I will use the example of yesterday's missive where our Client had Canada's CCRA go back to 1991 and assess him $77,000 in GST because he had not registered and had not filed a tax return.  Having his old records allowed D'Arcy von Schleintiz to reduce that bill from $77,000 to $27,000.  If the client had thrown his records away after seven years (the common time), he would be paying another $25,000 because the biggest amounts and hthe biggest penalties involved 1991, 1992 and 1993.
In the above case, the client had not filed the returns.  Therefore, the CCRA can "ask for them all".
We have had a 78 and 80 year old couple who sell stuff at flea markets asked for tax returns back to 1990 by the CCRA in the last six months and we have a Canadian stock broker (tax bill $280,000 Plus)  who are presently being audited back to 1990 because they had not filed returns.
In practical terms, if a Canadian has filed the returns to the best of his or her ability, the rule is that the government will not or cannot go back more than three years from the date of assessment.
I had a good example of that on June 20th when at a meeting at the CCRA office in Victoria.  I was there for an audit of a client's 1999 and 2000 income tax returns.
we had spent a "LOT" of time recreating the 1999 figures because the client's wife was doing the books and there were a lot of items in the wrong columns.  HOwever we were confident that the totals were correct within a $1,000 which was pretty good with $100,000 worth of expenses and some of them just notes for parking meters and the kind of thing where receipts are not easy.
When we went into the office, the assessor said that she had missed the deadline and it was too late for her to re-assess the 1999 return.  That was the good news.  As an aside, while I was in Victoria, unknown to me, my wife of twenty years was moving out of our house in North Vancouver into a boyfriend's house.  She had met the boyfriend formally one month earlier. Notice, I am still talking about timing.
M L, one of our clients (after the situation, not before) was reassessed by the US government for $186,000 US.  the IRS went back 9 years of unfiled tax returns.  By the time we were finished the bill was down to: (drum roll please) $144.60.  In the meantime, the bill had cost him his car, his house and his marriage.  He is also trying to figure out what parts were good and what parts were bad.
Income tax assessments are murder on a marriage.  Many, many fail because the pressure is just too much.
Note that everybody so far has been assesed becaaue they have not filed a return.  I understand, but have not seen it happen, that the IRS can go as far back as 1967 to ask for a tax return which has not been filed.  The most I have seen personally is the nine years for ML.
In Canada, the most I have seen is 12 years.
On the other hand both Canada and the US seem to stop at three years if no fraud is involved. 
If there is Fraud or wilful negligence.
In Canada, if you neglected to report the $9,600 a year you have been receiving for the suite in your basement, or neglected to report your part-time window glazing business for the last seven years the CCRA can open those old returns and go back eight years with impunity.
I do not know what the statute is for the US so if someone wants to enlighten me I will give you credit.
Hope this helps.  Even though you "can" write to the IRS or the CCRA and ask for permission to destroy your records, I sugges ttheat you do not do so.  Hold on to them.  Keep them in a few boxes in the corner.
Pass this on to your friend who has not filed a return for a dozen years.  Tell the friend tha teh CEN-TA Group can look after any return in the US or Canada with on-line programs for the US and Canada.  and WE CAN DO IT BY MAIL, FAX, EMAIL OR PERSONAL VISIT.
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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