Most people know they should keep their personal tax information, including their pay stubs, T4’s, T1 General, Notice of Assessment (NOA) etc., each year, but they don’t understand why. Well, beyond the CRA’s requirement for you to keep six years’ worth of records from the end of the last tax year (essentially seven years of records), did you know that it’s also important for qualifying for a mortgage or loan?

If you are looking to buy a home, lenders will want to see your Notices of Assessment, and your T1s General if your self-employed, for the last two years for a couple reasons:

  1. To ensure there are no taxes owing because the CRA can put a charge on title ahead of a mortgage lender for income tax arrears. No lender wants to be in second position on title!
  2. If you earn an hourly wage, have bonus or commission income or are self-employed, the underwriter will want to see two years of consistent income at that level in order to use it to qualify you. They do this by looking at Line 150 on your NOA and averaging it over the last two years. T1s General are important if you’re self-employed because they show, in more detail, how you earned your income (ie. employment income versus dividend income).

Throughout the year, you likely receive a significant amount of paperwork, some of which needs to be retained to prepare your tax return. Other documents may need to be retained to substantiate prior-year tax reporting. Maintaining your documents in an organized fashion will not only help you avoid missing valuable deductions to which you may be entitled, but will also help ensure that your income tax return is complete and accurate. If not, you can be out a lot of money in penalties and interest when errors are discovered.

To stay organized, and make sure you have everything you need on hand when the need arises, create a file folder for the year (ie. Income Tax 2016, Income Tax 2017 etc.). When you receive charitable donation receipts, T4s, your tax filing information from your accountant, and your NOA, put it in that file to keep it all together.

If you don’t keep your tax documents, and then need them for a home purchase for example, it can take two weeks to received duplicates from the CRA. This may put your home buying plans in jeopardy, if you have a property you’ve put in an offer on, or, at the very least, on hold until the duplicates are received.

Co-written with Martin Breeze, Mortgage Broker, TMG The Mortgage Group