- For individuals, trusts other than mutual fund trusts and Canadian-controlled private corporations, the normal reassessment period ends three years after the earlier of the date of the original notice of assessment and the date of the original notification that no tax is payable.
- The CRA can go back further only if an exception applies, such as misrepresentation or fraud, a valid waiver, an extended period for listed items, or a taxpayer relief request.
- Under the misrepresentation, fraud and waiver exceptions, a late reassessment is limited to the matter that triggered the exception.
You get a letter about a tax year that feels like ancient history, or you hear the CRA is auditing an older return. The first question is usually whether the CRA is still allowed to look at that year at all.
The Income Tax Act sets a time limit, called the normal reassessment period, and then lists exceptions. This article explains the limit, the exceptions, and how to work out whether an older year is closed to the CRA.
This article covers Canadian federal tax law, which applies in every province.
The normal reassessment period: three years or four, depending on the taxpayer
For individuals, trusts other than mutual fund trusts, and Canadian-controlled private corporations (CCPCs), the normal reassessment period ends three years after the earlier of two dates: the original notice of assessment and the original notification that no tax is payable. This comes from section 152(3.1) of the Income Tax Act.
The period is different for some taxpayers. Mutual fund trusts and corporations other than CCPCs have a four-year normal reassessment period instead.
Once the normal period ends, tax, interest or penalties cannot be assessed unless one of the listed exceptions in section 152(4) applies.
| Taxpayer | Normal reassessment period |
|---|---|
| Individuals, most trusts, CCPCs | Three years from the earlier of the original notice or no-tax-payable notification |
| Mutual fund trusts, corporations other than CCPCs | Four years |
The exceptions that let the CRA go back further
- Misrepresentation or fraud: the CRA may reassess if you made a misrepresentation attributable to neglect, carelessness or wilful default, or committed fraud, in filing the return or supplying information, and there is no fixed time limit.
- Waiver: a valid waiver on Form T2029 filed within the normal period lets the CRA reassess later, but only for the matters the waiver specifies.
- Extended period: the normal period is extended by three years for items listed in section 152(6), such as certain loss and investment tax credit carrybacks, and a waiver of that extended period may also be filed.
- Taxpayer relief: the CRA may reassess outside the normal period to the extent of a taxpayer relief request, and a request under section 152(4.2) must be made within 10 years of the end of the relevant calendar year.
A waiver included in the return when it is originally filed is not valid.
Limits on a late reassessment
A reassessment after the normal period under the misrepresentation, fraud or waiver exceptions is allowed only to the extent it can reasonably be regarded as relating to the matter that triggered the exception. So a single problem item does not reopen the whole year.
A waiver limits the Minister's power to reassess to the matters it specifies or that are reasonably related to them. The CRA's own audit manual says a waiver should be as specific as possible, and a waiver naming only the company and year is not in the taxpayer's favour. The CRA will not request a blanket waiver in advance of an audit, or one solely to extend audit time.
The CRA generally does not use the misrepresentation exception to reduce tax payable.
Misrepresentation, proof and revoking a waiver
In an appeal of an assessment made after the normal period, the burden of establishing misrepresentation lies on the CRA. It must show at least one misrepresentation that a normally wise and cautious taxpayer would not have made, even if made in good faith. Once the right to reassess is established, the onus shifts to the taxpayer on the amount.
If you signed a waiver, it can be revoked using Form T652 under section 152(4.1). The revocation takes effect six months after the notice is filed and cannot be rescinded once filed. After that the Minister cannot assess under the waiver.
How to check whether an older year is statute-barred
- Find the date on the original notice of assessment, or the original notification that no tax is payable, whichever is earlier.
- Work out which period applies to you: three years or four years.
- Ask whether you signed a waiver, and what matters it names.
- Check whether the year involves section 152(6) carryback items that extend the period.
- Consider whether the CRA could allege misrepresentation or fraud, which has no fixed time limit.
- Keep your books and records for a minimum of six years, with computer-based records in an electronically readable format.
Because a waiver, a carryback or an alleged misrepresentation can change the answer, it is worth confirming the analysis with a lawyer or accountant before you decide not to respond to the CRA.
Frequently asked questions
Does the three years run from the date I filed?
No. It runs from the earlier of the date of the original notice of assessment and the date of the original notification that no tax is payable.
Can the CRA reassess any year if it alleges misrepresentation?
The CRA can reassess after the normal period under that exception only if the taxpayer made a misrepresentation attributable to neglect, carelessness or wilful default, or committed fraud, and in that case there is no fixed time limit. In an appeal, the CRA has the burden of establishing the misrepresentation, and the reassessment is limited to what can reasonably be regarded as relating to the matter that triggered the exception.
Can I cancel a waiver I signed?
Yes, using Form T652 under section 152(4.1). The revocation takes effect six months after the notice is filed and cannot be rescinded once filed.
Who has to prove misrepresentation if I appeal?
In an appeal of an assessment made after the normal period, the CRA carries the burden of establishing misrepresentation. Once the right to reassess is established, the onus shifts to you on the amount.
Sources
- CRA Information Circular IC75-7R3, Reassessment of a Return of Income — canada.ca
- Income Tax Act, s. 152 — Justice Laws (federal)
- CRA Income Tax Audit Manual, chapter 11 — canada.ca
- CRA RC4188, What you should know about audits — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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