Under subsection 152(4) of the Income Tax Act, the Canada Revenue Agency generally has three years to reassess an individual, a Canadian-controlled private corporation, or most trusts, and four years to reassess other corporations and mutual fund trusts. The clock runs from the date the CRA mailed the original notice of assessment for the year in question, not from the date you filed. Once that period passes, the year is statute-barred and cannot be reopened, unless one of the specific exceptions in subsection 152(4) applies.1Justice Laws Website. Income Tax Act – Section 152
When the Clock Starts and When It Runs Out
The starting date is printed on the first page of your original notice of assessment. If you filed your 2023 return in April 2024 but the notice was not sent until June 2024, the three-year period runs from June 2024, not from your filing date.2Canada.ca. When the CRA Can Reassess Your T2 Return Keep that notice. It is what proves the year has closed.
The taxpayer categories in subsection 152(3.1) are:
- Three years: individuals, trusts other than mutual fund trusts, and Canadian-controlled private corporations.
- Four years: all other corporations and mutual fund trusts.
If no reassessment is issued before the anniversary, the CRA loses the ability to change your assessment for that year on ordinary grounds.
The Extended Reassessment Period: Three More Years
Paragraph 152(4)(b) gives the CRA an additional three years beyond the normal period for specific kinds of adjustments. For an individual, that produces a roughly six-year window from the date of the original assessment.1Justice Laws Website. Income Tax Act – Section 152 Two common triggers matter to most taxpayers.
The first is transactions with non-arm’s-length non-residents, and amounts related to foreign affiliates. Cross-border matters often require the CRA to work with foreign tax authorities or analyze transfer pricing, so the statute gives more time without opening the year indefinitely.
The second is loss and credit carry-backs. If you apply a loss or credit from a later year to an earlier year, subsection 152(6) requires the CRA to reassess the earlier year to give effect to the carry-back, and the extended period supplies the time to do so. Business losses carried back and unused foreign tax credits applied to a prior return are typical examples.1Justice Laws Website. Income Tax Act – Section 152
Subsection 152(4.01) limits what the CRA can do inside this extra window. The reassessment can only address the specific transaction or carry-back that triggered the extension. Unrelated items on the return remain closed.
When the CRA Can Reassess With No Time Limit
Subparagraph 152(4)(a)(i) removes the time limit entirely if the CRA can show a misrepresentation attributable to neglect, carelessness, or willful default, or fraud. A return filed twenty years ago is reachable if this threshold is met.1Justice Laws Website. Income Tax Act – Section 152
“Misrepresentation” here is broader than deliberate deception. Courts have treated “neglect” as a lack of reasonable care, meaning a return can qualify even without any intent to mislead. Using a professional preparer does not, on its own, shield you: the Tax Court has treated a failure to review a return before signing as neglect where a basic review would have caught the problem.
The burden sits with the CRA. To reassess beyond the normal period on this ground, the agency must show on a balance of probabilities that a misrepresentation exists and that it was caused by carelessness, neglect, willful default, or fraud.3Canada.ca. Reassessment of a Return of Income Suspicion is not enough. And even where the CRA meets that burden, subsection 152(4.01) again confines the reassessment to the specific misrepresentation identified.1Justice Laws Website. Income Tax Act – Section 152
Waivers That Keep a Year Open
Under subparagraph 152(4)(a)(ii), you can voluntarily extend the reassessment window by filing Form T2029 before the normal period ends.4Canada.ca. T2029 Waiver in Respect of the Normal Reassessment Period or Extended Reassessment Period The practical reason is timing. If an audit is running up against the deadline and the file is incomplete, a waiver buys time for a proper review, which is usually better than forcing the CRA to issue a protective reassessment on incomplete information.
A valid waiver has to identify the specific matters being kept open; it is not blanket authority. You can revoke it by filing a notice of revocation, after which the CRA has six months to reassess the waived matters. After those six months, the window closes for those issues.1Justice Laws Website. Income Tax Act – Section 152
Mandatory Disclosure Can Stop the Clock From Starting
Since June 2023, Canada’s mandatory disclosure rules require certain transactions to be reported to the CRA within 90 days, including reportable transactions, notifiable transactions, and reportable uncertain tax treatments. If you fail to report a required transaction, the normal reassessment period for the related year does not begin to run until you comply. The year effectively stays open until the reporting requirement is satisfied, at which point the three or four years begin.
This changes the usual assumption that a year becomes statute-barred based on the notice of assessment date. For undisclosed reportable transactions, that assumption is wrong. Filing Form RC312 or Form RC313 late is still better than not filing, because the clock cannot start without it.
What a Reassessment Actually Costs
A reassessment adds more than the missing tax. Interest runs on the unpaid balance from the original due date of the return, not from the date the reassessment is issued. A 2021 reassessment issued in 2026 carries interest all the way back to the April 2022 filing deadline. As of the first half of 2026, the CRA’s rate on overdue tax was 7%, set quarterly and compounded daily.5Canada.ca. Interest Rates for the Second Calendar Quarter
On top of that, subsection 163(2) authorizes a gross negligence penalty where a false statement or omission was made knowingly or in circumstances amounting to gross negligence. The penalty is the greater of $100 or 50% of the understated tax attributable to the false statement.6Justice Laws Website. Income Tax Act – Section 163 Combined with back interest, a reassessment reaching back several years can far exceed the original tax shortfall.
Objecting to a Reassessment
You do not have to accept a reassessment. Section 165 lets you file a Notice of Objection setting out why the reassessment is wrong.7Justice Laws Website. Income Tax Act – Section 165 The deadline turns on who you are:
- Individuals: the later of 90 days after the reassessment is sent, or one year after the filing deadline for the year in question.
- Corporations and trusts: 90 days after the reassessment is sent.
If you miss the deadline, you can apply for an extension up to one year after the objection was due, but you will need to show that you were prevented from filing on time or genuinely intended to object.8Canada.ca. Resolving Your Dispute – Objection Rights Under the Income Tax Act Filing an objection does not pause interest, so any balance owing keeps growing while the dispute is worked out. If the CRA confirms the reassessment, the next step is an appeal to the Tax Court of Canada.
How Long to Keep Your Records
The CRA requires books, records, and supporting documents to be kept for at least six years from the end of the last tax year they relate to.9Canada.ca. Where to Keep Your Records That six-year floor lines up with the extended reassessment period in paragraph 152(4)(b).
If a year could still be reopened past six years, because of possible misrepresentation issues or outstanding mandatory disclosure obligations, keep the paperwork longer. Discarding records for a year that turns out not to be statute-barred puts you at a severe disadvantage in an audit.