Also known as the false statement or omission penalty, this penalty is calculated the same way as the alternative method for calculating the repeated failure to report income penalty. It cannot be lower than that amount. To illustrate, imagine you intentionally did not report income on your tax return. When the CRA finds out, the agency can assess the gross negligence penalty. However, if you accidentally forgot to report the income or were truly confused about your obligations, the CRA cannot levy this penalty.
However, the CRA can only waive penalties for tax years within 10 years of the current year. For example, if you request to have a penalty waived in , it must be related to tax years ending in or later. You may also be able to avoid penalties if you take advantage of the voluntary disclosure program. This means you contact the CRA and let it know about the mistakes you made on your return. Unfortunately, however, you may not be able to use this program repeatedly.
If you use the voluntary disclosure program one year, the CRA expects you to file your taxes correctly the following years. However, you risk losing a refund altogether if you file a return or otherwise claim a refund after the statute of limitations has expired.
An original return claiming a refund must be filed within 3 years of its due date for a refund to be allowed in most instances. After the expiration of the three-year period, the refund statute prevents the issuance of a refund check and the application of any credits, including overpayments of estimated or withholding taxes, to other tax years that are underpaid.
However, the statute of limitations for the IRS to assess and collect any outstanding balances doesn't start until a return has been filed.
In other words, there's no statute of limitations for assessing and collecting the tax if no return has been filed. It happens. Minutes later, it occurs to you that in your haste to file, you forgot to claim your RRSP deduction—or to report that consulting work you did back in February of last year. What do you do? First, making a request too early could lead to unnecessary delays in processing time for both the original return and the adjustment.
Second, CRA could adjust your original return for you. If you have forgotten to report income, you do need to make sure that you report it as opposed to waiting for CRA to find it. There are two timeframes to keep in mind if you need to adjust your tax return. The first milestone is the end of the three-year limitation period usually the three years following the day your original notice of assessment for the particular year was issued. During this period, most adjustment requests are not subject to CRA discretion.
In the case of adjustments that reduce tax or increase refunds, your entitlement to the adjustment must be clear as opposed to an amount that can be disputed by the CRA as other deadlines apply for tax disputes. If you make a request for an adjustment beyond the limitation period and if the adjustment reduces tax or increases a refund, the adjustment is allowed at the discretion of the CRA.
Note as well that a request must be made within 10 years. For example, as the CRA explains , a request made in must relate to the tax year or a later one to be considered. Typically, a tax reduction or increased refund will be allowed if the CRA is satisfied that it would have been allowed on the original return and the adjustment you are requesting is correct in law.
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