Understand CRA audit timelines and protect yourself from potential tax reassessments and penalties.

The Canada Revenue Agency (CRA) can audit your tax returns from previous years. But how far back they can go depends on several factors. Let’s break down the key timeframes and what they mean for you.

The Standard Audit Period

The CRA typically has three years from the date of your Notice of Assessment to audit your tax return. For example, if you filed your 2020 tax return and received your assessment in June 2021, the CRA can generally audit this return until June 2024.

But this three-year limit isn’t set in stone. The CRA can go back further in specific situations.

When the CRA Can Look Back Further

The CRA can extend their audit period to six years or more in these cases:

• You made a mistake or omission due to carelessness
• You failed to file a tax return
• You filed an incorrect tax return due to fraud or misrepresentation
• You filed a waiver with the CRA to extend the normal reassessment period
• Your return involves a tax shelter investment
• Your return includes transactions with non-residents

No Time Limit for Fraud

If the CRA suspects fraud, they can audit your returns from any year – there’s no time limit. This applies to both personal and corporate tax returns.

Record Keeping Requirements

You must keep your tax records for specific periods:

• Personal tax returns and supporting documents: 6 years from the end of the tax year
• Business records and related documents: 6 years from the end of the last tax year they relate to
• Records for capital property: 6 years after you dispose of the property

Digital Records

The CRA accepts digital copies of receipts and documents. But you need to:

• Keep them organized and easily accessible
• Make sure they’re clear and readable
• Store them securely with backups
• Keep paper originals of documents that can only be validated in their original format

How to Protect Yourself

Take these steps to prepare for a potential audit:

• Keep detailed records of all income and expenses
• Save all receipts and supporting documents
• Organize your records by tax year
• Back up digital records regularly
• Document any unusual transactions or claims
• Use a professional, like us, to stay up to date

What Triggers an Audit?

The CRA selects returns for audit based on various factors:

• Large changes in income or expenses from previous years
• High vehicle expenses or home office claims
• Rental losses
• Self-employment income
• Large charitable donations
• International transactions

Getting Professional Help

If you’re facing a CRA audit, professional help can make a big difference. Our CRA audit support services can help you:

• Respond to CRA requests effectively
• Gather and organize required documents
• Handle communication with CRA auditors
• Appeal unfavorable decisions if needed

Prevention is Better Than Cure

Good tax planning and record keeping can help you avoid audit issues. Our tax services include strategies to:

• Keep accurate, audit-ready records
• File complete and accurate returns
• Plan for potential CRA reviews
• Stay compliant with tax laws

The best defense against a CRA audit is preparation. Keep good records, understand the timeframes, and get professional help when you need it. This approach will help protect you from potential reassessments and penalties.