There are some people who feel that the CRA can collect past years income taxes till the day you die. And there are others who feel that the CRA can collect taxes even after you are dead and gone. Well, the law cannot be stretched as far as that. The limitations statute restricts the time period during which CRA can take action towards a tax audit or for its tax collection agenda. Usually, there is a three-year limitations statute for the CRA when auditing a tax return and a ten-year statute of limitations for the CRA to collect past years income taxes.
The CRA is required to assess tax within a period of three years after the tax returns were filed with it. Under the tax regulations, no court proceedings without assessment for the collection of taxes can begin after three years have expired from the date of filing. The statute of limitations is six years if the taxpayer leaves out his or her extra gross income in excess of twenty five per cent of the amount of the gross income that has been stated in the tax returns filed with the CRA. This statute of limitations will not apply in the case of a fraudulent or a false tax return which has been filed with an intent to evade taxes.
The CRA cannot collect or levy taxes ten years after the assessment date of the tax or the levy when it concerns past years income taxes. Court proceedings have also to be started by the CRA within the ten-year statute of limitations. This ten-year statute of limitations can be stretched by a mutual agreement between the CRA and the taxpayer only if this agreement is done before the expiry of the ten-year period. The taxpayer has to understand the beginning date for the running of the statute of limitations. There could be exceptions to the tolling of the limitations statute and to the last day that the CRA can audit a tax return. There is a limit to the period that the CRA can collect past years income taxes.
There are even statute of limitations on a taxpayer to claim tax refunds for past years income taxes. A taxpayer can file a claim for a refund of tax of any overpayment of taxes in the previous years within a period of three years from the time the tax returns were filed with the CRA or two years from the time the taxes were paid, whichever period comes last. If there was no tax return filed with the CRA, then the claim could be made within two years from the date that the tax was paid.
For past years income taxes, a taxpayer can file a claim within seven years if the tax refund belongs to a bad debt or if it is in connection with a loss from a security which is worthless. You have to track down any documents which may be missing when you decide to submit past years income taxes. You also need professional help while doing so to prioritize your tax returns as tax refunds have expiry dates.