This article explains the normal reassessment period found in section 154 of the Income Tax Act (Canada) (“ITA”), its timelines, key exceptions, and rights of a taxpayer disputing a reassessment.
CRA Normal Reassessment Period
The Minister of National Revenue (the “Minister”) can reassess a tax return as of right within the normal reassessment period to adjust income, deductions, or tax payable. For individuals (T1 returns) and Canadian-controlled private corporations (CCPCs), this period is three years from the date of the initial Notice of Assessment. For non-CCPCs, it is four years from the original assessment date.
The CRA starts the calculation from the date on the Notice of Assessment. Once the limitation period lapses, the tax year becomes statute-barred, meaning the Minister cannot issue a reassessment unless the Minister shows that the taxpayer made a misrepresentation attributable to carelessness, neglect, or wilful default pursuant to subsection 152(4) of the Income Tax Act (Canada) (“ITA”).
Exceptions to the Normal Reassessment Period
The Minister can generally reassess beyond the normal reassessment period if it can be shown that the taxpayer made a misrepresentation attributable to carelessness, neglect, or wilful default. The Minister can also reassess beyond the normal reassessment period if a taxpayer signs a waiver of the normal reassessment period. This waiver allows the CRA to extend the reassessment period until the waiver is revoked.
CRA Audit Timelines
During an audit, the CRA reviews the taxpayer’s books and records to check whether the taxpayer has met its obligations. The duration of the audit varies based on the audit scope, quality of the taxpayer’s records, and CRA/taxpayer delays.
Tax Return Reassessment Rights
Upon receiving a reassessment, a taxpayer may dispute it by filing a Notice of Objection, generally due 90 days after the reassessment date. In limited circumstances, this deadline can be extended by up to one year.
Once a Notice of Objection is submitted, the CRA will review the taxpayer’s objection and may confirm, vary, or vacate the assessment. If the taxpayer disagrees with the CRA’s decision, the taxpayer can appeal to the Tax Court of Canada.
Conclusion – Get Advice
Understanding the reassessment period and ways that it can be extended allows a taxpayer to make informed decisions during a CRA audit or appeal. If you are facing a reassessment, speak with an experienced tax professional. Taxpayer Law specializes in resolving tax disputes. Let our experts help protect your rights.
We appreciate the contribution of Gurleen Ghotra in the development of this article.
