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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.

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Response from the owner:Dear Eliyas Thank you for the positive Google review and the kind words. We heave dealt with many CRA audit cases. We have delivered the best services to our clients as we are confident with our work and its quality. Please feel free to reach out us if you require our services in the future. Sam Faris
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Response from the owner:Said Thank you for the kind words and the 5 stars Google review. CRA issues may get very complicated. I am glad that everything worked out perfectly with you. Feel free to reach out to us any time you require our services. Sam Faris
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Response from the owner:Thank you Omar for your positive feedback and the five stars Google review. We have more than a decade of experience in dealing with the CRA audits and helping our clients and providing all the required support. As you noticed, we provide a high quality of work to support our calculations and to save our clients from an unfair assessments by the CRA. Thank you again and will remain at your disposal if you require our services in the future.
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Response from the owner:Anjan Your positive feedback is much appreciated. Providing a high quality services and submit the packages on timely basis is essential especially once it comes to cases which involves voluntary disclosures program. We prioritize these cases and we do our best to file the packages asap and before CRA contacts our clients. Thanks again and let us know if you have any question in the future. Sam Faris
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Response from the owner:Sangeet Thank you for the five stars review. Filling multiple years of personal and corporate tax returns is one of our specialties. We have been helping clients catching up with their taxes for more than 15 years now. While we are doing the work, we perform tax planning to minimize taxes owing and at the same time we prepare a high quality package to protect our clients and protect our work in case CRA decides to perform tax audit. Thank you again and feel free to contact us in the future if you have any question regarding our work. Sam Faris
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Response from the owner:Anish Thank you for your positive feedback. When it comes to CRA issues, meeting deadlines is extremely important and at the same time providing a top quality package is as important. This will avoid escalation with the CRA and as you realized, will save money to our clients. As in all cases, we took your case seriously and we aggressively worked on it to meet the deadline at the same time we did not compromise our work quality. I am glad that you are satisfied with the results. Posting the Google review is rewarding to our hard work too. Please feel free to contact us in the future if you have any questions. Sam Faris
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Response from the owner:Thank you for the positive five stars review and your kind words. Net worth audit is the most complicated audit that CRA performs where CRA has doubts that taxpayers under reported the income. This kind of audit is one of our specialties. Over the years, we have developed a unique and sophisticated strategy to defend our clients from the CRA excessive numbers. In many cases, CRA auditors acknowledged and complemented our work and our approach. We will remain at your disposal if you need our services in the future. Sam Faris
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