The Canada Revenue Agency allows you to carry certain losses back three years. To apply unclaimed losses from the current tax year to one of the three previous years, you must complete Form T1A, Request for Loss Carryback.
The CRA allows you to carry back non-capital losses, farming and fishing losses, net capital losses, and listed personal property losses.
Non-capital losses include losses from employment, property and your business, as well as allowable businesses investment losses.
Farm and fishing losses occur when your expenses from those activities exceed your income. However, if farming is not your main source of income, you may only be allowed to claim a portion of your losses each year, and the rest become restricted farm losses (RFL) – but you can carry RFL back using Form T1A as well.
Capital losses include losses related to the disposition of capital property, such as land, shares or bonds. Listed personal property refers to art, collectibles and rare objects.
Gathering Information for Form T1A
Form T1A requires a great deal of information from your federal income tax form. Before filling out this form, make sure you have completed your general income tax return.
You need information about your employment, your business and your non-taxable income. You also need to know your net capital losses from other years, your capital gains deduction, your business investment loss, and several other details regarding your income and losses.
To make things easier, Form T1A has the lines where you can find each of these figures on your return.
After you enter the required figures, the form guides you through a calculation to determine your losses in each category. The form prompts you to decide how much of these losses you want to apply to each of the three previous years, and it helps you calculate your remaining losses, which you can save to carry forward as desired.
Carrying Back Your Losses
There are separate sections to carry back non-capital losses, farming and fishing losses, net capital losses, listed personal property losses, and RFL. Do not combine these losses or add them together. They must be claimed separately and noted in the appropriate sections.
Choosing a Year for Carryback
Although form T1A does not ask you for any information from any of your previous years’ returns, you should have them on hand when you fill out this form. Farming and fishing losses, net capital losses, and listed personal property losses can only be claimed against the same type of gains.
Carry these amounts back to years when you have reported gains in those categories. If you carry the losses back to a year when you do not have that type of gain, it will have no affect, but you will lose the loss and be unable to use it again.
Do not complete an amended return for the year when you are requesting to have the carryback applied. Using the information from Form T1A, the CRA calculates your refund or reduction in tax owed, and it does not need an amended return.