We solve serious CRA tax problems

How Long Can the CRA Audit You & How Far Back Can the CRA Audit Your Taxes?

How Far Back can CRA Audit?

The CRA is limited in how far back they can look at someone’s returns  – in most cases.

Normally,  a  CRA waudit the two or three most recent tax years.

If the CRA finds significant discrepancies in their tax audits they have the authority to go further back and audit previous years. If the CRA sees fraud or serious issues with your tax returns, there are no limits as to how far they can audit.

Offshore audits look for unreported income or assets held outside of Canada and are usually longer than a typical audit because it is more serious and there is potentially, more money for the CRA to recover.

That is why offshore audits usually encompass ten years’ worth of tax returns. So if an offshore audit was started in 2018, it usually asks for information and documentation starting in 2008.

Simple reviews where the CRA is only looking for proof of a credit typically only ask about one year.

So, how far back can CRA Audit? The answer is that there is no limit as long as they can justify their results by claiming the taxpayer is lying and / or cheating on their tax returns.

A woman preparing her taxes

Assessments and Reassessments

There are also limits as to how far back the CRA can go with respect to reassessing someone’s tax return. As mentioned above, the CRA administers assessments to promote awareness of and compliance with the laws it administers. The CRA conducts these assessments upon the completion of an audit on the taxpayer. The normal period for reassessment for Canadian income taxes is three (3) years from the date your tax return was initially assessed. For example, if you filed your 2015 income tax return on April 30, 2016, the CRA will issue an initial Notice of Assessment on June 1, 2016. This also means that the Reassessment period will last until June 1, 2019.If you file late  you may also be subject to a  penalty for filing taxes late in Canada.

However, as with audits, there are situations where the CRA can extend the Reassessment period. If the CRA believes the taxpayer has misrepresented their Tax Return due to carelessness or willful action, then the CRA can reassess the Tax Returns at any time. The CRA can do the same if it expects fraud from the taxpayer.

That said, the CRA must be able to prove fraud, neglect or wilful fraud. Simple mistakes on a taxpayer’s return do not equate to fraud. There must be more substantial errors and purposeful errors. The CRA can also reassess a taxpayer’s returns after the three (3) year period has passed if it can produce a waiver that was signed by the taxpayer.

How Long Should I keep CRA Records?

It is important to note that the year limits discussed above are different from how long you are required to retain your financial records and supporting documentation. Taxpayers are required to keep their financial documents and records for six years in case the CRA requests them. For example, you cannot destroy your 2017 tax returns or supporting documentation until 2023.

As an exception, if you filed late returns, the six-year rule applies to the date of filing, not the tax year. Documents should be maintained until the last date of appeal expires or the six-year period ends. Taxpayers should use the latest date as their guideline.

For reassurance, taxpayers should keep their original tax records, including the original tax return, invoices, receipts, cancelled cheques and anything else that supports the declarations they made in their respective tax returns.

If you are being audited or reviewed by the CRA, we can help. It is in your best interest to have a tax lawyer on your side because auditors are only after one thing, your money. Contact us today to learn more.

About the Author

pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

I was referred to Mr. Faris by another professional who recommended him to deal with my multiple years of outstanding corporate and tax returns. I interviewed Sam and was impressed in his confidence and transparency. He did not promise the moon just to get my business. Sam was able to file all returns under the voluntary disclosure program. After completing filling all tax returns, I realized the amount of money he saved me. I enjoyed very much working with him. He ensured that the work progress flow smoothly without any complications. He took to consideration the emotional stress factor and he was available to speak with me even beyond business hours just to make me more calm and to make me feel that he is on top of the matter and it will be resolved to my satisfaction. Indeed, this is what happened. The matter was resolved to my satisfaction and CRA concluded that the returns which Sam filed are reasonable and there is no need to further audit me nor my company. In summary, Sam is a life saver. He saved me and saved my family and now I am in the right track where all my tax filing obligations are met and I don’t owe any taxes. So grateful to Sam and his dedication while working on my file.
Response from the owner:Raj Thank you for the positive Google review. We are happy that you are satisfied with our services. Voluntary disclosure program is one of our specialties and we have dealt with many complex cases too. We get referrals from other professionals as we have been in the business of fighting CRA many years and we have countless success stories that many professionals are aware of. Please do contact us if you require further help in the future.
Sam is an excellent CPA and the best tax consultant in the country. He helped me to deal with a very complicated tax audit with the CRA where the CRA sent me a proposal assessment of 1.5 million dollars based on their net worth audit calculation and analysis. Sam was able to provide a counter analysis which highlighted significant mistakes that the auditor made with his assumptions and calculations. It’s ridicules that CRA wanted to taxed me on a loan that I obtained from my bank. Sam dealt with this audit perfectly. He demonstrated a very high level of expertise and CRA had to accept his counter analysis with no question asked. Many thanks to Sam’s efforts and high business standards in dealing with this issue and resolve it to my favor. I will have Sam as my primary CPA going forward so I can focus on doing business and will have a peace of mind in terms of the high quality of work done by him. Well deserved this review with the 5 stars rating.
Response from the owner:Yash Thank you for the positive feedback and the 5 stars Google review. We are glad that you are happy with our service and you are satisfied with the outcome. Net worth audits are very complicated and disputing them might get very tricky. We have been dealing with the same types of audits for many years and we are confident in fighting CRA and to point out mistakes that the auditor have made while performing the audit. We will remain at your disposal anytime you contact us in the future.
Sam Faris helped me with a complex cross border tax matter. This issue involved 12 years of tax returns and it was as a result from mistakes that my previous accountant did. He was able to perfectly address the issue with the CRA and to fix the returns under the voluntary disclosure program. End results; CRA accepted Sam’s work with not a single question and the returns were reassessed to my satisfaction without penalties and interest. Many thanks to Sam brilliant work.
Response from the owner:Dear Sir It was a pleasure working on your file and get you the results that you aimed to have and to your satisfaction. We have been dealing with similar cases for many years and we were confident that the results are favorable. Please feel free to contact us in the future if you do require further help.
I found Sam’s firm online and I read the excellent Google reviews about him and his team. I decided to hire him to help me navigate an issue with the CRA. Sam delivered as expected and as promised. Results were to my satisfaction and I am very happy with how the process was handled. Highly professional and extremely knowledgeable.
Response from the owner:Dear Tanya Thank you for the 5 stars Google review and your kind words. We strive to provide the best customer service and make our clients relax and calm during the process. The cases we are taking are very sensitive so providing quality work to the CRA is extremely important so just to avoid any escalation and to make sure that our package is accepted from the first round. We will remain at your disposal anytime you require our services. Sam Faris
You will notice Sam is very quick with his responses. He knows his stuff and gives solid advice. Highly efficient, would recommend.
Response from the owner:Dear Jay Thank you for the 5 stars positive review. Working with you was pleasant too. Many thanks for your business and please do feel free to contact me if you have any questions. Sam Faris
after the initial assessment I had with Sam, he proposed a strategy to dispute CRA decision. He knew up front how to approach my case as he seemed that he dealt with similar cases many times. I hired him the end results were as promised and no surprises. Sam is very trust worthy and has a high business standards. May thanks Sam.
Response from the owner:Many thanks for the positive review.
I recently turned to Faris CPA for help with my tax filing, and I must say, I'm over the moon with the results! The whole process was a breeze, saving me time and stress. What really stood out was the friendly professionalism, impressive expertise, and crystal-clear communication from Sam and his team. They made what could've been a daunting task feel like a walk in the park! If you're looking for a warm, approachable tax expert who genuinely cares about his clients, I wholeheartedly recommend Sam and the folks at Faris CPA - they're great tax consultants!
Response from the owner:Many thanks.
Working with Sam and his team was an extremely valuable experience. One of the best Tax consultants in Toronto I've ever come across.

He has a ton of experience resolving problems with the CRA and was truly a big asset to me when I had issues I needed help with.

Would highly recommend Sam and Faris CPA, thanks again for all the great work!
Response from the owner:Thank you Paul for your positive feedback and we are glad we met your expectations.
I had an amazing experience working with Faris CPA for my CRA needs. They really know the CRA processes and made everything so easy. They were super professional, always ready to answer my questions, and made sure everything was done right. I couldn't have asked for better help. Highly recommend their services for anyone dealing with the CRA! -Sara
Response from the owner:Thank you Sara for the 5 stars review.