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RRSP Adjustment

At the beginning of April, I filed a client’s 2019 and 2020 returns at the same time. I checked the box in TaxCycle that says prior year returns will be filed at the same time but it seems CRA chose to ignore that and assess 2020 first. So of course the RRSP deduction limit was assessed incorrectly. I had to wait 2 weeks for the 2019 return to be assessed and the RRSP updated appropriately on his account, then I submitted an adjustment to his 2020 return to fix their error. That was two weeks ago. Now he has received a letter saying that due to the complex nature of the adjustment request, it’s taking much longer than expected. I don’t understand what’s so complicated about matching his RRSP deduction limit.

This client is overcontributed on his RRSP and I filed a T1OVP in March, perhaps that has something to do with it?

I’ve been seeing those letters ("…complex nature…will take longer to process…") quite regularly since February. In one case, the T1-ADJ was processed/assessed a week later. In another case, it’s been 10 weeks and still waiting. My guess is that CRA is sending those notices for every T1-ADJ.

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I just adjusted missing 2015 and 2018 RRSP contributions confirmed in RAC.Is it complex because it’s two years?

I think those adjustments used to trigger an immediate Notice of Assessment as long as the numbers synced.

i didn’t know about that option. where is it?

So this adjustment was FINALLY assessed as filed so that’s the good news. The bad news is that CRA has randomly re-assessed my client’s 2011 tax return and determined he owes $5766, half of this is interest! Apparently they have adjusted the RRSP income line item. My client no longer has documents or slips for 2011 and doesn’t know where this is coming from. Any suggestions as to how I can get to the bottom of this?

Ask the CRA for detailed calculations, look into prescriptives time limits

As far as i know, 2011 would be statute barred unless they suspected fraud but i don’t think that’s the case

The CRA audit time limit states that the agency has four years from the date on your Notice of Assessment to go back and conduct an audit. This means if you file your 2017 tax return in April 2018 and receive your assessment in June 2018, the CRA can audit this return until June 2022.

I think ITA 152(3.1) defines the normal reassessment period for individuals to be three years after the date of the NOA, assuming no fraud, gross negligence or wilful neglect.

The 2011 slips are still available in RAC.

The reassessment adds $20k in RRSP income with respect to the LLP (line 5511). My client tells me that he had participated in the LLP and then emigrated to the US, losing track of the repayments. He was a non- resident from 2011 to 2017. Does this constitute as gross negligence or wilful neglect? There are no RRSP income slips on his account and the LLP /HBP continuity is unavailable on RAC. I will have to call them and ask to see the continuity of withdrawals and repayments but wandering if I can insist on it be vacated due to being statue barred.

If you look at the case law, gross negligence or wilful neglect is not an easy thing for CRA to make stick. The onus is on CRA to prove it, not just to suggest it. Gross negligence, as the courts look at it, involves greater neglect than simply a failure to use reasonable care. It requires almost an indifference to whether the law is complied with or not. I have had CRA propose gross negligence penalties on clients resulting from audits. I have had them only go ahead with these twice and both were overturned on appeal.

Sorry to keep resurrecting an old post. It appears that when I filed the adjustment requesting CRA correct the 2020 RRSP deduction (to match what was on CRA my Account), it triggered CRA to go all the way back and re-assess 2011. In my list of notices on RAC, it has “NOR issued - Client or rep request” next to the 2011 NOR. Clearly I did NOT request them to open up a statute barred year. Am I missing something? What is my next step here? I am thinking to file a Notice of Objection on the grounds that the year is statute barred and my client no longer has records of the LPP repayments. Is this right approach? Thank you all for your help!

So the client filed a paper emigration T1 for 2011 tax year?
You are going to need to start with a copy of that to see what he declared when he tax emigrated.

Similarly, fairly recently (2018), he filed a Tax - immigration T1 for the 2017 tax year (and correspondingly declared to the IRS he was no longer tax resident there). He should have copies of something.

The client must be able to get some documentation from his financial institution(s) to provide to you. They may charge him a small fee for that, but that will be the price of him not keeping his own records or at least some basic notes of same.

If he cannot give you any documentation information, you cannot help him, as you have nothing to go on.
As far as the documentation in your own hands goes, CRA may be 100% correct for all you know.

If the client is an American citizen, the IRS won’t care where he lives as he must declare word wide income because of citizenship.

You’re right Joe, CRA may very well be correct! Does that mean that they have authority to go back and re-assess a statute barred year? Could a notice of objection be filed based solely on the fact that 2011 should be statute barred ?

I have no idea if the proper T1 immigration/emigration forms were filed but the 2011 return was assessed as an emigrant. On top of all this, he is planning to emigrate again at the end of the month to Mexico where he will work as a national given that he is originally from Mexico.

As this is out of my wheel house, I am considering referring him to someone else. If anyone on this board is in the Toronto/York Region area and has experience with ex-pat and non-resident taxes, please let me know.

“Could a notice of objection be filed”

Perhaps along the lines of:

“Dear CRA,
Thank you for spending a very long time in doing a careful examination of this matter “due to the complex nature” of this taxpayer’s file.
I see that your careful examination and calculation has resulted in my client needing to pay some extra tax.
However my client objects because he has lost all his records and does not feel like paying additional tax. He does not have any reason not to pay the amount assessed, nor has he any documentation to show that he does not owe this amount, other than he does not remember that he owes this tax, and therefore does not feel like paying taxes now that he should have paid a long time ago. Besides, he is going to leave Canada again shortly”

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Doesn’t sound very persuasive…
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Perhaps CRA could be asked to provide a copy/summary of what information they used in their calculations, to assist the taxpayer to remember why he owes the money?

How persuasive does it need to be when it’s a statute barred year? CRA should have made this assessment sooner. That’s the point of the normal reassessment period. Half of the assessed amount is interest over 10 years. Even if my client admits his mistake and agrees to pay the tax, is there any way to fight the interest?

As I mentioned above, you are going to have to start with the details that the taxpayer actually filed when he filed his original 2011 tax return.

If he filed it correctly, CRA would have assessed it correctly at the time.
So why now the difference?

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If the taxpayer was careless (or worse) in filing his 2011 original return, the minister is not bound by the normal reassessment period (see sub (4)).

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From the sounds of things, the taxpayer should pay his taxes and move on. From your comments, he already knows he should pay.

Perhaps he could make a fairness application to reduce interest, but from your description he likely does not have grounds that would fly.
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It could even be that he owes more for 2010 and prior, but CRA is not pursuing those, being over 10 years…

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