# CRA wants to "validate" my statute-barred returns



## harmonize (Feb 17, 2016)

I'm a sole proprietorship and I had some business losses (non-capital losses) in 2007, 2008, and 2009 that I wanted to carry forward to deduct in a future tax year.

All my returns were filed on time, accepted by the CRA, and never questioned or audited. However, the losses from 2007-2009 are not shown on any statement I receive from the CRA. When I phone the CRA, the telephone agent is able to look up those individual years and confirm the exact losses. But it still doesn't show up as a carry forward on my Notice of Assessment or anything official I get from the CRA.

I finally wrote the CRA a letter asking them to fix this. And now it seems I've opened up a can of worms! After 4 months my letter was referred to a "technical advisor" at the CRA related to my business area (software and technology) who wants copies of everything I filed for 2007-2009 (because "he can't locate everything I filed") and then he needs to "validate" my losses.

I've spoken with this person. He agrees that I did declare these losses and he can see the amounts I claimed. He agrees that normally it should have been automatically entered into CRA's systems and he can't explain why it's not there. However, he says that he still needs to "validate it". Once he checks my returns, he says he'll give a "yes or no" to the carry forward. It's not an audit or a re-assessment he says.

I pointed out that this sounds like a re-assessment and that this is not allowed since the 3-year period for re-assessment has long passed and now the returns are statute barred (except in cases of fraud or gross negligence -- which I'm certain would not apply to me).

The losses in question are shown clearly on my submitted returns, and at this point the CRA should simply accept it as is. Is this not correct?

What are your opinions on the best strategy here? Should I give him copies of everything he's asking for and then try to appeal it afterward if he refuses the carry forward? Should I escalate this with the CRA (because he's trying to do a re-assessment)? Should I just withdraw my request for them to fix this? (I'm not planning to deduct the losses this year, so I could ask the CRA to fix it in a future year.)


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## Just a Guy (Mar 27, 2012)

As far as I'm aware, CRA can go back and look at anything they want, for any period. It does not have to be related to fraud. 

If you want to take advantage of the losses, you need to jump through the hoops. If you've got nothing to fear, why are you making a big deal about it? By acting confrontational, they may be more inclined to look closer. This may have been a quick look, but now it may turn into something more.

Of course, I'm not an accountant, but I've always tried to be nice to CRA, since they can make your life miserable, even if you haven't done anything wrong.


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## harmonize (Feb 17, 2016)

Not being confrontational with the CRA is certainly good advice. I was very polite when I spoke with the CRA.

But this doesn't seem like a "quick look" to me. I wrote my letter to the "T1 Adjustments" section. A quick look would be to look at what I filed, see that my losses hadn't been entered into the correct place in their computers, and then to enter those numbers. It's a simple mechanical procedure. No one needs to check/validate/re-assess anything to fix the carry-forward problem.

The technical advisor is not an auditor. Perhaps he doesn't even realize that he shouldn't be "validating" statute-barred returns.

I could comply and give him everything he wants (which is a strange request in itself since they should already have all of this). But then if he renders a negative opinion, perhaps it'll make everything worse. Could it be a uphill struggle at that point? Might it better that I take a stand right now and say that my returns cannot be re-assessed (or "validated" as he calls it)?


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## 0xCC (Jan 5, 2012)

Are you sure about that 3 year limit? I always thought it was 7 years but I don't have anything to back that up because I am too lazy to look for a link to prove it. Seven years puts you back to your 2008 return right now.

If you think you filed your returns properly and don't think that the CRA can come back to you for anything you filed then I'm not sure I understand what the issue is. I guess you have to weigh how much you will save by being able to claim the losses from previous years vs. how much you want the CRA digging around in your old returns.


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## Just a Guy (Mar 27, 2012)

It's probably to late to try and ignore it, you started the process, CRA found an issue (just because it's their problem doesn't change anything) now they want it resolved. You can't ignore it now.

Just for the record, it's a myth that there is a limit as to how far back they can go. It's also a myth you can get rid of your records after 7 years. Technically, after seven years you can send them a letter asking permission to get rid of records that are seven years or older, but they don't have to grant it. CRA can look at anything they want, from any time period. If you destroy your records, without written permission, you can get into trouble. All this is highly unlikely, but technically the rules.

One thing for sure, if CRA becomes aware of an issue, you can't just ignore it anymore.

Btw, they make mistakes all the time, they are run by humans after all. In your case, the data on their end doesn't match their records. They are asking for proof of the entry. If the proof matches the entry, everything will be fine, if it doesn't, there will be a correction. To me this looks the same as if you filed a child fitness credit and they asked for the receipt for the sports program to verify you actually paid money for the program and didn't just claim the funds. Their records state you qualified, but they want to verify that you were entitled to it...no audit, or reassessment, just a verification by a technical advisor.

You started this, you've got no choice now, and at worse you lose a credit you don't have right now.


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## Bowzer (Feb 25, 2015)

Just a Guy said:


> Just for the record, it's a myth that there is a limit as to how far back they can go. It's also a myth you can get rid of your records after 7 years. Technically, after seven years you can send them a letter asking permission to get rid of records that are seven years or older, but they don't have to grant it. CRA can look at anything they want, from any time period. If you destroy your records, without written permission, you can get into trouble. All this is highly unlikely, but technically the rules.


Out of curiosity, I just looked this up. 

http://www.cra-arc.gc.ca/E/pub/tp/ic78-10r5/ic78-10r5-10e.html

That document states 6 years, with these notable quotes:

"Books and records may be destroyed at an earlier time than outlined elsewhere in this circular if the Minister gives written permission for their disposal. To get such permission, a person can use Form T137, Request for Destruction of Records, or can apply in writing to the director of his or her tax services office. "

"The Minister may, by registered letter or by a demand, served personally by a representative of the CRA, require specific records to be kept for an additional period of time that will be stipulated in the letter or demand."

Otherwise it is the 6 years as we understand it. You only ask permission if you want to destroy them before that or if they specifically ask you to hang onto them longer.


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