CRA Reassessment: How Far Back Can It Go?

The CRA can reassess your taxes after they have been filed and initially assessed. How far back can a reassessment go? The normal reassessment period is three years but can very depending on the specific circumstances. If you’re being reassessed, you will need the Ex-CRA tax professionals at Farber Tax on your side.

If you are wondering how far back the Canada Revenue Agency (“CRA”) can reassess your tax return, we have the information you are looking for. Contact us today if you have any questions, or if you disagree with your CRA Notice of Reassessment and wish to object.

In order to understand the reassessment process, it helps to know a bit about the CRA and the tax system in Canada works. The first thing you’ll need to know is the difference between an assessment and a reassessment.

As the CRA puts it, an assessment is designed to “promote awareness of and compliance with the laws it administers”.

This means that the CRA will look at the information you provided on your return, check it for accuracy, and potentially request additional information as needed. When the CRA initially assesses your tax return, you will receive a Notice of Assessment (NOA). This will detail the amount of tax that you owe (or the refund that you will receive), as well as other information about your tax situation. However, once your return has been assessed, the CRA can reassess it later if they choose to.

The CRA usually processes tax returns in about two to six weeks after they have been filed. In some cases, a pre-assessment review could be conducted before you receive your Notice of Assessment. This is a situation where the agency will review the credits and deductions that you claimed, and potentially ask you for additional information or documentation. Once the NOA is sent out, your return could be reviewed under the processing review program.

The CRA can reassess your taxes after they have been filed and initially assessed. If the CRA decides to review your tax return, the agency will contact you. Your return could be selected for review for a number of reasons, including random selection.

Your return could also be reassessed as a part of the CRA matching program. This is a situation where the agency compares the numbers you entered on your return to the numbers it receives from other sources. For instance, it may compare the amount you listed as your income to the amount that your employer listed when they filed their return. Typically, this review happens later in the year, once NOAs have been sent out.

If you are selected for a reassessment, a CRA auditor will scrutinize your amounts reported, and you may asked to provide supporting documentation.

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One of the most common questions that we receive about CRA reassessments is “How far back can the CRA reassess me?” Many people worry about the CRA auditing years and years after filing a return, leaving them struggling to remember financial details from years ago, and scrambling to find supporting documents to prove their amounts. When the CRA issues its reassessment, many people are left with massive tax debt from years ago that they do not know how to fight.

The good news is that there are limits as to how far back the Canada Revenue Agency can go when it comes to reassessing someone’s tax returns. The normal reassessment period for Canadian income taxes is three years from the date that your tax return was initially assessed. For example, if you file your 2014 income tax returns on April 30, 2015 (i.e. on time), the CRA will likely issue the initial NOA on June 1, 2015. The reassessment period would last until June 1, 2018. Certain parties, such as mutual fund trusts and certain types of corporations, may have a longer, four-year reassessment limitation period.

There are situations where the CRA can extend the reassessment period. If the agency believes that the taxpayer misrepresented his or her tax situation on a previous return due to carelessness or willful action, the CRA can reassess even if it is beyond the regular three-year period. The same is true if the CRA suspects fraud.

In order to reassess the return, the CRA must prove that fraud, neglect or willful fault occurred. These terms do not mean that you have made a simple, honest mistake on your return. They refer to something more substantial. For example, the CRA can claim that material errors, such as misrepresenting income, are important enough that the limits of the reassessment period be waived.

Importantly, the CRA can also reassess after the three-year limit has passed, if you have signed a waiver permitting them to do so.

It is important to note the limits on reassessment are different from how long you are expected to retain records and supporting documents. If you are wondering how long to keep tax records, the CRA states that you are required to keep these documents for six year, in case they are requested by the CRA. If you file your return late, you must keep the documents for six years from the time of filing, not the date of the return.

Having your documents is critical. As you can imagine, going into a CRA audit with no receipts can be incredibly difficult. The agency will require you to provide firm proof of your financial and tax situation. If you cannot provide the documentation needed to do so, you could find yourself dealing with a lengthy audit, or even have your claims ignored or denied by the CRA.

If the CRA has contacted you regarding an audit, it’s critical that you speak to one of our tax professionals as soon as possible. Not only can we communicate with the CRA on your behalf, but we can also help you prepare for the audit. Our team will review your situation and inform you of which documents you’ll need to have to satisfy the CRA. This will give you the opportunity to find them and be prepared for when the CRA asks.

If you have any questions about the reassessment process or if you are being reassessed or audited by the CRA, please contact us today to find out how we can help.

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