Do you need your tax return reassessed by the CRA?
Canadian taxpayers have a period of three years to get their tax returns reassessed by the Canada Revenue Agency (CRA). Once this normal reassessment period has passed, many taxpayers then want to know if an extension is available. A similar situation was recently addressed by the CRA in Document No. 2013-0487181I7 (Extension of reassessment period – July 12, 2013), in which the CRA was asked to provide its views on the operation of subsection 220(3) of the Income Tax Act (ITA).
AG Tax professionals have prepared a brief summary on this document and the CRA’s response, as it may be useful for Canadian taxpayers in similar situations.
The requestor is a Canadian corporate taxpayer who failed to file a corporate income tax return T2 and was issued an “arbitrary assessment” by the CRA. The taxpayer filed the T2 for that particular tax year after three years, but as the “normal reassessment period” had expired, the CRA refused to reassess the return. The taxpayer then filed a request with the CRA to extend the reassessment period.
Does the Income Tax Act provide for a reassessment extension?
• Subsection 220(3)
Subsection 220(3) provides the Minister with the discretion to extend the time for filing a return under the Act. However, such discretion can only be exercised for a taxation year that is under the normal assessment period. This period is three years from the date of the initial Notice of Assessment or “Nil Assessment” sent by the CRA, not from the date of the tax return filed.
Therefore, the CRA responded by stating that subsection 220(3) cannot be applied since the tax return was filed after the normal assessment period. However, the CRA mentioned that the taxpayer could refer to subsection 152(4) which deals with extension of reassessment period.
• Subsection 152(4)
Subsection 152(4) outlines the circumstances when an assessment, reassessment or additional assessment of tax can be made, irrespective of the expiration of the normal reassessment period. Subsection 152(4.2) allows the Minister to reassess tax, interest and penalties for a taxation year at any time after the end of the normal reassessment period, as long as the taxpayer makes the reassessment request within 10 years of the end of that taxation year. However, this subsection is applicable only in the case of individuals and trusts, not corporations.
In summary, corporations currently only have the opportunity to receive reassessments on filed returns during the standard three year assessment period, as Subsection 152(4) does not provide for extensions of the assessment period for corporations. On the other hand, individuals and trusts may have returns outside of the standard three year assessment period reassessed if they successfully have the assessment period extended by appealing to Subsection 152(4).
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