After you file your taxes you will receive a Notice of Assessment which details the amount of tax that you owe or the refund you will receive. Sometimes you will be asked to do a preassessment review in a situation where the CRA will ask you for additional information or documentation. The CRA can reassess your taxes after they have sent out your Notice of Assessment. This usually happens later in the same year. You should respond to the CRA by the deadline (usually 30 days from the date of the letter) with the information requested.
A CRA reassessment or audit can be very worrying for most taxpayers and a common question is “How far back can the CRA reassess me?” There are limits as to how far back the CRA can go to reassess someone’s taxes returns and the usual time limit is three years from the date your return was filed. However, they can extend the reassessment period if they believe that you may have carelessly or willfully misrepresented your tax situation, or if they suspect fraud. In order to reassess the CRA must prove that fraud, neglect or willful fault occurred. This does not mean that you made a simple mistake on your return but that you made a serious misrepresentation such as in reporting your income.
It is important that you keep all your tax information and documents for six years in case they are requested by the CRA. Should you be subject to a reassessment or audit it would be difficult to prove your case without supporting receipts. The CRA must have proof of your financial and tax situation and if you are unable to provide the documentation then you could end up dealing with a lengthy audit.
If you are being audited there is nothing that you can do to stop it, and the worst thing that you can do is to ignore communications from the CRA. The best thing you can do is to get organized with your paperwork and receipts and to be as cooperative as possible. Also, it is advisable to get professional help as soon as you get your audit letter so that you can prepare a better case.
An audit can be a “desk audit” which is common if you have business income and declared losses, or, if you have real estate transactions reported on your return. In a “field audit”, the taxman will show up at your home or place of work.
For more information on CRA Tax Audits visit:https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4188.html
Top New Years Resolutions for Business Success
Accounting Terms Every Businessperson Should Know
Why a Joint Venture Could Save Your Small Business
You Must Include These 10 Essential Elements in Your Business Plan
Why Small Businesses Go Bankrupt and How to Avoid It
Places Where it Can be Risky to Swipe Your Debit Card
Tips to Keep Your Credit Card Safe
The Personal Tax Filing Deadline is April 30th – Some Last Minute Reminders