Tax Returns Cannot Be Changed After Ten Years!

Taxpayers often think that it is possible to add in additional old receipts that have been uncovered in their basements, or to file personal tax returns going back decades. This is not the case. The Canada Revenue Agency will only accept changes and filings of tax returns within a ten year time frame.

This can be particularly dangerous when it comes to notional assessments. If you do not file a tax return and the CRA issues an arbitrary assessment, essentially filing the return on your behalf, you can only have the amounts adjusted to actual by filing your tax return during the ten year period. Once that period is exceeded, you are out of luck.

For example, the CRA notionally assessed a taxpayer for their 2002 personal tax return in 2012. The 2002 personal tax return will only be accepted until December 31, 2012. If the Canada Revenue Agency arbitrarily assesses you for taxes of $100,000and you do not file your own return within the ten year limit, that $100,000 of taxes owing will remain on your account. There will also be penalties and interest applied on top of the tax. You may need to use the equity in your home to pay it, or even result to a consumer proposal or bankruptcy just to remove this amount from your tax balance, even though you may have actually owed nothing for that year.

  Don’t let time pass you by. It’s time to get around to filing those outstanding tax returns, before it really is too late. 

Over-Payment of CPP and EI Are Only Refunded For Limited Time

If you work two jobs in a year, both of your employers are likely deducting CPP and EI from your pay cheques, which sometimes result in you, the employee, over-contributing to CPP and EI during the year. Typically, your accountant will calculate the overpayment and reduce your personal income tax owing by this amount.

This can be done in prior years BUT only to a maximum of four years for CPP and three years for EI. This means that if you are behind on filing your tax returns more than 3-4 years, it is possible that the Canada Revenue Agency will deny your over-payment and not reduce your taxes payable by this amount.

The amounts of overpayment are usually not large, but keep in mind that penalties and interest are charged on the overdue taxes. This means that the denial of the Canada Pension Plan and Employment Insurance amounts will result in more tax, more penalties and more interest. Over a number of years, the small overpayments that were denied have grown, essentially on a daily basis as the CRA computes compound interest daily.

So do yourself a favour and file those tax returns. Even if you think you have refunds, why take the risk of losing out on potential CPP and EI over-payments.

Feel free to contact our firm to help you get up to date with your tax filings.