The thought of reassessment for tax returns gone by makes anyone a little nervous — an average taxpayer won’t remember the hows and whys of decisions made years ago, particularly under the worry of a big and retroactive tax bill.
Thankfully, CRA guidelines protect you from reviews of the distant past, and complying with record-keeping requirements ensures you have the information you need to support your returns.
Review Vs. Audit
The CRA has two reassessment vehicles that may affect your tax return.
While both might be perceived as audits, the CRA emphasizes that a tax review is not a formal audit, but rather, a process that promotes awareness and compliance with tax laws, while audits aim to protect the self-assessment tax return system. Reviews check income amounts, credits, deductions and supporting claims, and have four types, generally occurring the same time each year.
Pre-assessment is busiest from February to July, before Notice of Assessment issue. Processing reviews happen after assessment issue, peaking from August to December. The Matching program also occurs post-assessment, with most activity between October and March, and reviews through the Special Assessment Program may occur at any time.
When your return is subject to review, the CRA corrects errors via Notices of Reassessment, noting amounts owed or credited due to reassessment. Field audits, which are comparatively rare, are conducted in person and are subject to date restrictions.
Time Requirements for Tax Records
The rule for retaining tax returns and documents supporting the return is six years from the end of the tax year to which they apply. For example, a 2015 return and its supporting documents, are safe to destroy at the end of 2021.
There are situations that alter this rule. If you have filed late returns, the six-year rule applies to date of filing, not the tax year.
“Objections and appeals and their expiry dates may go beyond the six-year guideline,” says Ben Campbell, certified financial planner with Investors Group Financial Services in Winnipeg, Manitoba. “Documents should be maintained until the last date of appeal expires, or the six-year period ends. Use the latest date as your guideline.”
As well as your tax return itself, records should include:
- cancelled checks
- anything else that supports information declared in your return.
In case you are reviewed or audited within the time frames illustrated, your best preparation is found in your tax records. For many conventionally employed taxpayers, your “T” information slips may comprise most of your tax records. Further documents should be kept when you claim deductions such as medical expenses.
References & Resources
- Ben Campbell B.Comm (Hons.), CFP, Financial Consultant, Investors Group, 10 Island Shore Blvd., Winnipeg MB
- Canada Revenue Agency: Review of Your Tax Return by the CRA
- Canada Revenue Agency: Types of Reviews