In last month’s letter, various situations were discussed with respect to how long the CRA have to reassess a return or election. There is one further situation worth mentioning, namely the filing (or, to be precise, non-filing) of a return for a partnership.
Generally, partnerships must file an annual T5013 information return, reporting the income earned in the partnership. However, the CRA have an administrative policy that doesn’t require partnerships to file this annual return in certain circumstances, for example where the income plus expenses of the partnership for the year does not exceed a certain amount.
However, this has implications for the reassessment window for the year. Specifically, if a partnership takes advantage of the CRA’s administrative policy and does not file a return for a year, the Income Tax Act provides that there is no limit on the length of time the CRA have to reassess that year. So, where no partnership return is filed, there is an indefinite reassessment period.
For this reason, it may be advantageous to file a return, even if one is not strictly required due to the CRA’s administrative policy. Doing so will generate an original assessment which will start the three-year reassessment clock for that year, rather than giving the CRA an indefinite time period to come back and reassess the year.