When dealing with tax returns, there is one specific document that is more important than all others. No, we’re not talking about tax slips, although they are important too. We are talking about your Notice of Assessment. Unfortunately many people ignore the assessment, even though it is a crucial document for your tax return. Let’s take a closer look at this document, and why it is so important.
What it is
The Notice of Assessment at its base is a snapshot of your tax return. It is the acknowledgement of the CRA that you have filed your return, and a confirmation of the result. When the CRA has assessed your tax return, they will send you this document either by mail or email. In order to better place the document in your mind, it was the document for which the CRA would attach your tax refund cheque before direct deposit became more prevalent.
If the CRA disagrees with the return you have filed, the first indication of this will be on your Notice of Assessment. The CRA will explain the differences between the return you sent and what they assessed.
Your Notice of Assessment also lists your carryforward amounts for future years. For example, unused tuition amounts, capital loss carryforward, business losses, or non-capital loss carryforwards. These amounts can be used to reduce taxes payable in future years. Of course, if you are not aware that you have these amounts, you cannot benefit from claiming them.
RRSP room and limit
Amongst the most important information you can find on the Notice of Assessment is your RRSP room and limit. You find the calculation of your room at the bottom of one of the pages of the assessment. Not only do you see your limit, but you can also see if there are any unused contributions for which you can use in future years. These amounts can be used to reduce your tax payable, especially in years for which you have not contributed to your RRSP.
Reference document for loans
When you are applying for loans with a financial institution, they will invariably ask you how much income you made in the prior year. The document that the loaner will ask you as proof of the income you gained in the prior year will be your Notice of Assessment. The assessment is the official document that confirms to the financial institution your financial position. For many institutions, a copy of the tax return you have filed is not enough; it does not hold the “seal” of the CRA.
Electronic format (My Account portal)
As mentioned above, the CRA normally sends you the Notice of Assessment by mail after they have assessed your return. You can also access your Notice of Assessment through the My Account portal offered by the CRA. The portal offers all sorts of relevant information on your tax return, including the Notice of Assessment, your last 3 tax returns, carryforward amounts, and your RRSP and TFSA limits. The only place you can see your TFSA limit is through the My Account portal.
Signing up to My Account is very easy. If you have online banking with certain financial institutions, you can use their log in credentials to get in. The first time you sign up, the CRA will assign you a temporary pass code in order to activate the account; from then on, you can use your online banking credentials.