How Far Back Can CRA Audit?
The CRA has a wide range of powers. Many people and businesses worry about a facing CRA audit. When potentially facing a audit, you might be asking "How far back can the CRA audit?" In general, the CRA has three years to audit your returns but thats not always the case.
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All About CRA Audits
Most people fear the words “CRA Audit” and that’s understandable. The audit process isn’t enjoyable for anyone (except possibly the Canada Revenue Agency) and even if the agency finds nothing wrong in your returns, the process itself is a lengthy, confusing, and often stressful one. So, it’s only natural that most people want to avoid it.
So when can you stop worrying? How far back can CRA audit? The answer isn’t as straightforward as you may think as the CRA has very strong powers.
How Far Back Can CRA Audit?
In general, the CRA has three years from the date of your tax assessment or reassessment to audit your returns. This means that if you file your 2018 taxes and receive your tax assessment in June 2019, the CRA can audit this return until June 2022.
However, an important point to note is that if the agency suspects fraud, it can go back even further, and audit returns outside of that three-year window. The CRA may go back and look at prior year returns if it believes you misrepresented yourself either willfully or by accident. Though, to be able to do so, it needs to be able to prove that fraud or negligence occurred.
What Happens During a CRA Audit?
If the CRA decides to audit your tax return, it will likely start by gathering information. This means the agency will examine all of your documents and records, and potentially interview you or anyone who may have knowledge about your business activities (if you operate a business). The auditor will most likely request that you supply the documents, receipts, records, and invoices that are relevant to your tax situation. You should supply these documents and not doing so will not make the CRA go away. In fact, it could make the situation worse.
In this first stage, the CRA auditor is looking for information that the agency may use to potentially expand the scope of the audit.
Once the information gathering stage is complete, the auditor may issue a proposal letter. This letter outlines the findings of the audit. If you disagree with these findings, you have 30 days to respond and rebut the proposal letter. It is best to have a professional on your side when you do this to give you the best chance of success.
When the audit is complete, the auditor will issue a tax reassessment that will reflect the findings of the audit. You may also be charged penalties if it is determined that that the adjustments were necessary due to fraud or negligence on your part.
CRA Audit Help
As mentioned, the answer to the question of how far back can CRA audit is three years, unless the agency suspects fraud. That’s why it is important to keep all relevant tax documents for at least six years. You may be asked to produce them during an audit.
If you are prepared and handle the audit properly, your audit will likely go smoothly. If you are audited, it is a very good idea to have an experienced professional on your side. CRA auditors are very skilled and they know how to ask the right questions and find the information they are looking for. If you are working with a professional, this person will ensure that your rights are protected and that the audit is fair.
The team at Farber Tax Solutions understands how to successfully handle a CRA audit and communicate and negotiate with CRA officials. You don’t need to be intimidated by the Canada Revenue Agency. Contact us today to find out how we can help you.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.