How Far Back Can the CRA Audit You?

The normal reassessment period is defined in subsection 152(3.1) of the Income Tax Act. For most individuals and Canadian-controlled private corporations (CCPCs) it is three years; for other corporations — those that are not CCPCs — and for mutual fund trusts it is four years. In each case the clock runs from the day CRA sends the original Notice of Assessment for the year (or the original notification that no tax is payable), not from the day the return was filed and not from the day it was read.

Inside that window, CRA can reassess the year for essentially any reason, and a taxpayer can equally ask CRA to adjust it. The starting point matters more than it first appears: because the period is measured from the original assessment, a later reassessment issued within the window does not, on its own, restart the clock for unrelated issues. The question "how far back can CRA go?" is therefore answered by two dates — the date on the first Notice of Assessment, and the day three or four years later when the window closes.

Subsection 152(4) sets out the exceptions. CRA may reassess beyond the normal period where the taxpayer made a misrepresentation attributable to neglect, carelessness, or wilful default, or committed fraud, in filing the return or supplying information — and for that issue there is no time limit. CRA may also reassess an otherwise-closed year where the taxpayer has signed and filed a waiver (Form T2029) within the normal period. Separate statutory extensions reach further still for defined matters such as transactions with non-residents or tax shelters.

The critical point is where the burden sits. To open a statute-barred year, the Minister must first establish the misrepresentation and that it was attributable to neglect, carelessness, or wilful default — it is not enough to assert it. Only once that threshold is met can CRA reassess, and even then the reassessment is confined to what the misrepresentation actually touches. The same finding of conduct is what a gross negligence penalty under subsection 163(2) turns on, so a reopened year and a proposed 50% penalty often arrive together — each assessed separately, and each carrying the Minister's burden of proof.

Yes — the same period can sit under more than one clock. For GST/HST, section 298 of the Excise Tax Act sets a four-year assessment period, running from the later of the day the return was required to be filed and the day it was actually filed. As with income tax, that limit falls away where there is misrepresentation attributable to neglect, carelessness, or wilful default, fraud, or a waiver in effect. A registrant's GST/HST exposure for a period can therefore close on a different date than the income-tax exposure for the same period.

Payroll source deductions follow different rules again. Amounts withheld from employees are held in trust for the Crown, and CRA assesses failures to deduct or remit under provisions that do not carry the same normal reassessment period. Directors have their own, separate exposure: under section 227.1 of the Income Tax Act, a director can be personally liable for unremitted source deductions, subject to a limitation that no action may be commenced more than two years after the director last ceased to be a director. One tax year, in short, can be governed by several clocks at once — which is why "how far back" rarely has a single answer for a business.