Generally, the Canada Revenue Agency has 3 or 4 years to reassess a taxpayer (the “normal reassessment period”), depending on who the taxpayer is:
- Corporations (other than Canadian-controlled private corporations (“CCPCs”)) or mutual fund trusts: Generally, the window for reassessment will remain open for 4 years from the date of the notice of an original assessment or the original notification that no tax is payable.
- In any other case (this refers to individuals, CCPCs and any other person not referred to above): Generally, the CRA will have 3 years from the date of the notice of an original assessment or the original notification that no tax is payable to reassess a taxpayer.
The deadline imposed under the Income Tax Act is important because it prevents the CRA from going back in time indefinitely to reassess a taxpayer. In other words, the CRA cannot reassess beyond the deadline, unless special circumstances:
- Misrepresentation or fraud: The CRA is barred from reassessing a taxpayer beyond the normal reassessment period only if the taxpayer was diligent in filing his income tax return or reporting information to the CRA. If the CRA can prove that the taxpayer, or the person filing the return on his behalf, “has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information” under the Act, the CRA is no longer bound by any time limitation period.
- Waiver: If a taxpayer filed a waiver “in prescribed form” with the CRA agreeing to let the CRA reassess him beyond the normal reassessment period, the CRA is no longer bound by the normal reassessment period.
Even if a taxpayer decides to sign a waiver, he should not agree to a blank waiver. Instead, he should limit the waiver, both in terms of the additional amount of time given to the CRA and the scope of the reassessment. For example, if the CRA asks for more time to review the business expenses claimed by a taxpayer, the taxpayer can agree to give the CRA two more months to reassess and limit the scope of the reassessment to the business expenses only.
- Miscellaneous: In some circumstances, the Act specifically provides that the CRA shall have 3 years in addition to the normal reassessment period to reassess a taxpayer. Those circumstances are very specific and can be found at paragraph 152(4)(b) of the Act.
Last updated: November 3, 2016