What Is a Notice of Assessment?

What Is a Notice of Assessment?

Let me explain what a Notice of Assessment is. It's an annual statement that the Canada Revenue Agency sends you as a taxpayer, detailing the income tax you owe. You'll find specifics like your tax refund amount, any tax credits, and the income tax you've already paid. It also covers deductions from your total income, total nonrefundable federal tax credits, total British Columbia nonrefundable federal tax credits, and other related figures.

Key Takeaways

As a Canadian taxpayer, you should know that a Notice of Assessment is the government's estimate of your taxes owed for the year. If there are corrections to these estimates, they'll show up on the NOA, and you have 90 days to formally object or amend any information. Keep in mind, the NOA might also indicate if you've been selected for a tax audit.

Understanding Notices of Assessment

The figures in your NOA come directly from the information you submitted on your tax return. It will list any changes, including corrections to what you provided. Additionally, the NOA tells you if you're subject to an audit. You have 90 days from the date on the NOA to file formal objections, either online or by mail. You'll need to include supporting documentation, but you won't have to pay any disputed taxes until the CRA finishes its investigation.

Important Note

Remember, a Notice of Assessment is that annual statement from the Canada Revenue Agency detailing your income tax owed, plus amounts for your tax refund, tax credit, income tax already paid, and more.

Registered Retirement Savings Plan (RRSP)

Your NOA gives you key details about your Registered Retirement Savings Plan. It shows the maximum you can contribute to your RRSP for the next year, which is 18% of your previous year's earned income or the maximum for the current tax year, whichever is smaller. You can deduct RRSP contributions from your taxable income. You're not required to claim them in the year you make them; you can carry them over to the next year if you expect higher income and a higher tax bracket. These are called unused contributions, and they let you claim a bigger deduction on a larger tax bill.

That said, if your unused RRSP contributions from prior years plus current ones exceed the deduction limit on your latest NOA by more than $2,000, you'll owe a tax of 1% per month on the excess. You can also deduct certain transfers into your RRSP without impacting your limits, such as lump-sum amounts from non-registered pension plans for services when you were a nonresident of Canada, eligible pension income from estates or testamentary trusts, and amounts from foreign retirement arrangements like US Individual Retirement Accounts.

Examples of RRSP Contributions

Here's how it works in practice. If you earned $50,000 and contributed $1,000 to your RRSP in a year, you'd be taxed on $49,000. If you don't reach your maximum contribution limit for a tax year, you can carry over the unused amount to the next year. For instance, if your limit was $15,000 but you contributed nothing, the next year's limit would add that $15,000 to whatever your new maximum is.