CRA’s 10-Year Tax Collection Period: What You Should Know?

Most taxpayers wonder how far back the Canada Revenue Agency (CRA) can go when assessing and collecting tax debt or auditing tax returns. The Income Tax Act gives the CRA strong powers to assess and collect tax. The agency can even use its power to seize your assets and bank accounts or garnish wages without a court order and even without notifying you, the taxpayer. However, the Act limits the CRA on how far back it can reassess and collect tax.

These limitations are essential to give taxpayers peace of mind that the CRA can audit and assess only for a limited period. This will save them from a significant tax debt (after adding years of penalties and interest) they didn’t know they owed. This article will discuss the CRA’s limitations for tax reassessment and collection.

How Far Back Can the CRA Go to Reassess Taxes?

There are two stages of CRA assessment.

Notice of Assessment (NOA): When you file tax returns, the CRA does an initial review and sends a NOA stating any tax dues. You have until 90 days from the date of the NOA to make the payment before the CRA can begin tax collection action.

However, the assessment does not end here.

Notice of Reassessment: The CRA has three years to reassess your tax return from the date of NOA and four years to audit your returns. If you received NOA for 2015 tax returns in June 2016, the CRA has until June 2019 (3 years) to send a Notice of Reassessment and until June 2020 (4 years) to audit your returns.

The Notice of Reassessment replaces the NOA. In most cases, the reassessment shows that you owe more tax than stated in NOA.

What Can Taxpayers Do?

If you receive a Notice of Reassessment from the CRA, you have two options:

• Agree with the reassessment, pay the tax owed and move on.
• If you disagree with the reassessment, you must file a Notice of Objection within 90 days from the date on the Notice of Assessment or Reassessment, along with supporting documentation to back up your claims.

The Two Sides of The 10-Year Tax Collection Limitation Period

The Limitation of a 10-Year Period: The Income Tax Act legally bars the CRA from collecting tax debt after ten years of inaction. However, specific actions by the CRA and the taxpayer can reset the 10-year collection period to the date of the action:

The CRA can:

• Certify your debt in the Federal Court of Canada, which gives the CRA the right to seize your banks and assets and garnish wages.
• Initiate the process of seizing and selling your assets to collect tax debt.
• Issue a Notice of Assessment or Reassessment against a third party (a spouse relative or related corporation) for your tax debt.
• Start the garnishment process to collect your tax debt from the third party who owes you money.
• Use your tax credits and refunds to reduce your tax debt and notify you via letter or statement.

The taxpayer’s actions could be that they,  

• Acknowledge the debt in writing
• Give a written promise to pay the debt
• Negotiate a payment plan with the CRA
• Make a payment that was not honoured, such as a bounced cheque or a supposed payment.
• Offer to provide security rather than pay tax debt
• Make a written request for a reassessment
• File a Notice of Objection against CRA’s reassessment
• File an appeal with the Tax Court of Canada on the outcome of the objection

The taxpayer should keep an accurate record of all their communication with the CRA, given that any of the above actions can reset the 10-year limitation period.

For instance, the CRA reassessed you for the 2012 tax year and pursued collection action until 2015. It can take any collection action until 2025. If there is no collection action until then, the CRA cannot legally collect the debt in 2026. However, this does not mean your tax debt has vanished. The debt will continue until it is paid in full, but you can make voluntary payments to repay the debt.

What Can You Do with Your Tax Debt?

Ignoring the tax situation and waiting for the 10-year statute limit to be over is not an intelligent strategy. Remember, the CRA officers understand their powers and limitations and are well-trained to use them effectively. They can take action without your knowledge.

When dealing with experts, every step should be well planned. You need solid points and necessary documents to back your claims. Before contacting the tax collector, it is advisable to contact a professional tax advisor who is well-versed with the tax laws and processes and any exceptions.

Contact DDL & Co. in St. Catharines to Help You Plan Your Tax Debts

A skilled tax expert can guide you at every step and negotiate and settle the tax dispute with the CRA on your behalf, ensuring you are not paying anything more than legally required. To learn more about how DDL & Co. can provide you with the best tax consulting expertise, contact us online or call us at 905-680-8669.