Every year, the Canadian Revenue Agency (CRA) goes over your tax return and sends it back as your Notice of Assessment (NOA). This certificate tells you how much you owe the federal government or are due to receive from it as a refund or credit.
Your NOA is an important document you must keep somewhere safe with your other tax records. However, before putting it away, take time to understand the information it contains.
Account Summary
This section of your NOA shows the outcome of the CRA assessment on your tax return. It can be an amount you owe the government, including any outstanding balances from past returns. It can also be a refund or will show a zero balance.
If you filed returns from at least two consecutive years at once, your NOA would also reflect the CRA’s concurrent assessment results for all those years. Additionally, if you send new information that can impact your returns for certain consecutive years, this section will show the agency’s concurrent reassessment result.
Tax Assessment Summary
You will find the main lines on your assessed tax return in this section, side by side with the amounts the CRA used to compute your balance. You can review these figures against those on your return to see if there were any adjustments.
Also, this section will reflect any interest and penalty on your owed amount or refund and any balance you owe from a past assessment.
Explanation of Changes and Other Important Information
If you want to know the reasons behind the adjustments or corrections on your tax return, this is where you’ll find them. All of those changes are based on your on-file information and the facts you provided through your return. If you have specific questions about tax assessment in Canada, your CPA is the best person you can ask.
Suppose you feel the CRA has assessed or reassessed your tax return incorrectly. You can file a formal dispute within 90 days of receiving your NOA. You can also send additional information if you want the agency to review to change some items on your return.
RRSP Deduction Limit Statement
This section tells you your Registered Retirement Savings Plan (RRSP) limit. To understand it fully, you need a good grasp of a few related terms.
Deduction Limit
How much RRSP contributions you can deduct for the following year is known as your deduction limit. In this part of your NOA, you will learn how the CRA came up with this limit using details you have provided on your past tax returns and your records at the agency.
Available Contribution Room
You have available contribution room if your deduction limit exceeds all the unused and current RRSP contributions you’re claiming on your return. Your available contribution room is the highest amount you can put into the following year. This is calculated by subtracting your unused previous RRSP contributions (which also appear on your statement) from your deduction limit.
Excess Contribution
Lastly, your excess contribution is the amount of RRSP contributions you’ve made above your deduction limit. Note that excess contributions are taxable.
HBP and LLP Statements
If you signed up for the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP), you would find your HBP or LLP statement in your notice of assessment or reassessment. You will know how much you still have to pay and the smallest amount they will accept as payment for the following year.
This minimum required repayment is part of the balance you need to pay. If you make a payment short of the minimum requirement, you must indicate the difference on your return as RRSP income.
The CRA can’t stress the importance of keeping your NOAs enough. They prove that you’ve filed your income tax returns and come in handy when you apply for credit or mortgage. Of course, they can also reflect the exact opposite, depending on how you manage your taxes. In any case, your NOA can help you in any situation requiring the verification of your tax situation in Canada.