Maintaining good records on your employees should be considered essential to running your business. At the end of the fiscal year, you want to have copies of all the records you have on each employee right at your fingertips. However, most businesses find that they really only use these records at the end of the current year. They very rarely look at them ever again, but you never know when you may need them. How long should you really plan to keep your payroll records?

Understanding the importance of maintaining your records is essential to running your business well. The Canada Revenue Agency sets out a few guidelines related to what records you should maintain and for how long. Take a look at what your business might be missing with these standards.

What should I keep?

First, you need to evaluate what kind of payments you make directly from a paycheque for your employees. Businesses who deduct income tax, Canada Pension Plan contributions, or Employment Insurance premiums should keep detailed records on the amount of money subtracted from each paycheque for the contributions, premiums, and taxes. You should also keep a record of how many hours each employee worked.

In addition to those items, you should plan to keep these documents:

Form TD1, Personal Tax Credits Return

Form TP1015.3-V, Source Deductions Return (employees working in Quebec only)

Canada Revenue Agency letters of authority that let you reduce the tax deductions for certain employees during a given year

Information slips issued

All returns filed

Registered pension information

How long should I keep this information?

Now that you know exactly what you are supposed to keep, it’s important to discuss how long you need to maintain these records. The Canada Revenue Agency created a handy guide to give you some advice on how long to maintain all of your records. In most situations, you are required to keep all payroll records for six years following the end of the last tax year they relate to.

There are some exceptions to this general rule of thumb. Keep in mind that you may have to keep your records for a longer period of time if any of these circumstances apply to your business:

The records and supporting documents that might have an effect on the sale, liquidation, or wind-up of the business: Indefinitely keep the records

The end of a non-incorporated business or other organization ends: six years for the end of the tax year in which the business ended

The dissolution of a corporation: two years after the date of the dissolution

Understanding how long to maintain your tax records and payroll records can be tricky for any business. That’s why you need an experienced accounting firm that can help you to make wise decisions for your business. Compass Accounting has the experience and expertise you need to help keep your business running smoothly. Give us a call today to see how we can help you succeed!