As the extended personal income tax deadline just passed on June 1st or is coming on June 15th for those who are self-employed, you may be waiting for a refund or making a payment to the Canada Revenue Agency (CRA). Once your tax return is processed, the CRA will send you a Notice of Assessment (NOA). What is a notice of assessment, and what valuable information can it tell you? This blog will explain how to read your Notice of Assessment to review the result of your assessed or reassessed tax return, explain how to review crucial RRSP information contained in the NOA, and what other data your NOA can provide.
Personal Tax Assessment Result
First and foremost, people will use their NOA to review the final result of their personal tax filing. This may include a refund, a zero balance, or a balance owing. The amount shown also includes any outstanding balances you may owe from previous returns. As well, if for some reason, you filed returns for several years at the same time, you will receive a concurrent assessment.
It will show you the major lines of the standard personal tax return and the amounts that the CRA has calculated for those lines. It will also show any interest and/or penalties that have been levied.
Notices of Assessment and RRSP Information
The NOA provides valuable RRSP information that is provided as follows:
- The deduction limit listed on the NOA is the maximum RRSP contributions you can deduct for the next year. This will help you with your tax planning for the upcoming year.
- The last line of the statement gives your RRSP available contribution room. This is the maximum amount you can contribute for next year. This is good information to have if you find yourself with excess funds at some point throughout the year (possibly from an inheritance or a bonus at work).
- If your RRSP contributions exceed your deduction limit, you have an excess of contributions. You may have to pay tax on this amount.
- If you participate in the Home Buyers’ Plan (HBP), you will see your HBP statement on your NOA or reassessment.
- Your minimum required repayment is the portion of the balance you have left to repay. If you pay less than the minimum amount, you will have to include the difference as RRSP income on your return.
- If you participate in the Lifelong Learning Plan (LLP), you will see your LLP statement on your NOA or reassessment.
- It shows the balance left to repay, and the minimum required repayment for the next year.
- Your minimum required repayment is a portion of the balance you have left to repay. If you pay less than the minimum amount, you will have to include the difference as RRSP income on your return.
What Other Information Can my Notice of Assessment Tell Me?
Notices of Assessment can be useful for other reasons. For example, if you have a home equity loan and wish to increase the amount you can borrow, your bank or lending institution may ask for your NOAs from prior years. These can easily be obtained from your CRA MyAccount – something that we have talked about in a previous blog.
Other important information about the Notice of Assessment:
- If you file your tax return electronically, your NOA will show up about two weeks after you have filed your return.
- If you file a paper copy of your return, the NOA will arrive in about eight weeks. If you are expecting a refund, the wait will no doubt be much longer than if you filed electronically.
- The NOA will tell you if you happen to be the subject of a CRA audit. You have ninety days to file a formal objection to the audit if your NOA indicates this.
- You can view your NOA online. All Notices of Assessment and Reassessment that were issued after February 9, 2015, are available to view and print via the CRA My Account site. Detailed summaries of notices issued between 2004 and February 9, 2015, are also available to view and print.
- The CRA recommends that taxpayers keep all tax records for at least six years.
- If you haven’t filed your return, you may still receive an NOA if the CRA chooses to arbitrarily assess you and input amounts such as your income on your behalf. An arbitrary assessment occurs in some cases when the CRA does not receive a tax return from a taxpayer, so the agency estimates the amount of income earned and various other amounts based on previous filings to create a tax return. The agency will then send out an NOA to inform the taxpayer of how the agency views their tax situation. This can obviously come as a surprise to the taxpayer, and the numbers used in the arbitrary assessment may not necessarily be the same ones that the taxpayer would have used. If you receive an arbitrary assessment, you should speak with an accounting professional right away.
If after reading this blog, you have questions on how to best use the information provided to you in your notice of assessments for tax planning and compliance purposes, please contact the experienced Chartered Professional Accountants at ESS CPAs LLP by calling 905-517-2297 or by reaching out online.