How Far Back Can the CRA and IRS Go? Reassessment Periods, the Six-Year Doors, and the Years That Never Close

Limitation periods are the tax system's promise that the past eventually closes — and the cross-border file is where the exceptions cluster. Canada's architecture: the normal reassessment period runs three years from the date of the original notice of assessment (four for certain corporations) — within it, the CRA can reassess for any reason; beyond it, a year is statute-barred unless a door opens. The doors: misrepresentation attributable to neglect, carelessness, wilful default, or fraud reopens a statute-barred year without time limit (the standard the CRA must establish, and the reason representations in audits of old years fight on that ground first); a three-year extension — six years total — applies to specified categories including transactions with non-arm's-length non-residents (the cross-border business's related-party dealings live here) and reassessments consequential on foreign-based information; and the foreign-property rule every T1135 filer should know — where the T1135 wasn't filed as required and foreign income was omitted, the reassessment period extends three additional years, the provision that converts a missed information return into a longer exposure window for the whole year. Waivers extend by consent (the audit-season form trading time for the alternative of an immediate protective reassessment — signed strategically, scoped narrowly, revocable on notice). The IRS's architecture: assessment generally within three years of filing; six years where gross income is understated by more than 25% — and, decisively for this corridor, six years where more than $5,000 of income from specified foreign financial assets is omitted; no limit for fraud — and no limit where no return was filed, because the statute never starts on an unfiled year, the rule that makes decades-old unfiled 1040s legally live however stale they feel. The information-return suspension is the expat-specific dragon: where required international information returns — 3520, 5471, 8938, and family — weren't filed, the assessment statute for the entire return stays open until three years after they are, meaning one missed 5471 holds the whole year open indefinitely; filing the delinquent forms is what finally starts the clock, one more argument for the repair procedures over quiet hope. Refunds run on their own, shorter clocks in both systems — Canada's adjustment windows and the US three-years-from-filing/two-from-payment rule — producing the asymmetry every catch-up project meets: the government's assessment window can be open while your refund window has closed, so delay costs credits even when it doesn't cost penalties. The strategic translations: keep records past the folk-wisdom horizons (six-year documents for three-year promises, permanent files for basis, foreign assets, and anything feeding a T1135 or 8938); read every proposed reassessment against the applicable period before conceding the merits (statute-barred is a complete answer where the doors don't open, and the CRA bears the burden on the misrepresentation door); sign waivers narrowly and knowingly; and treat unfiled returns and unfiled information forms as what they are — years that never close until filing closes them.

Key takeaways

• The base clocks: CRA — three years from the assessment date (the notice's date, not the filing date); IRS — three years from filing (or the due date if filed early). Inside them, anything; outside, only through doors.
• The six-year doors: CRA — non-arm's-length non-resident transactions and related categories; IRS — 25% gross income understatements and the >$5,000 omitted-foreign-income rule that puts most unreported-foreign-account cases on the six-year track automatically.
• The forever conditions: fraud (both systems), the CRA's misrepresentation-by-neglect standard for statute-barred years, unfiled US returns (no clock ever starts), and the US information-return suspension — one missing 5471/3520/8938 holds the entire year open until three years after it's filed.
• Canada's foreign-property extension: missed T1135 plus omitted foreign income = three extra years on the whole year — the information return that quietly lengthens exposure, and the repair (VDP or late filing) that ends it.
• Refund clocks are shorter and unforgiving: the assessment/refund asymmetry means catch-up delay forfeits credits and refunds even where it escapes penalty — old overpaid years die quietly while old underpaid years live.
• Statute analysis precedes merits analysis: every audit of an old year starts with the period computation and the door the authority claims; waivers get scoped and dated; and record retention follows the six-year doors, not the three-year folklore.

The cross-border filer's limitation calendar

Three habits implement the whole area. The permanent file: basis records, foreign-asset acquisition papers, and anything supporting T1135/8938 positions kept indefinitely — these documents defend years that reopen. The six-year archive: complete return packages, slips, and workpapers held six-plus years in both systems' terms, because the six-year doors are the ones cross-border files actually meet. The open-year register: one page listing, per system, each year's assessment date or filing date, its computed closure, any waiver signed, and any information-return gap holding it open — updated at each filing season, it converts "can they still touch 2019?" from anxiety into a lookup, and it is the first exhibit in every statute-barred defence.

Worked example

Two limitation questions land the same month. Question one: the CRA proposes reassessing a Mississauga consultant's four-years-back year over management fees paid to his Florida affiliate. The register shows the year's normal period expired — but the transactions are non-arm's-length with a non-resident: the six-year door is open for exactly those transactions, and the audit proceeds on that scope alone; his representation confines the reassessment to the door's categories, and an unrelated proposed adjustment to that year's (purely domestic) vehicle expenses dies as statute-barred. Question two: a Seattle-based dual citizen asks whether her 2016-2019 unfiled 5471s "matter anymore." The answer reorders her month: those years' entire 1040s remain open — the information-return suspension never started their clocks — while her refund positions in two of them are already dead by the refund statute's shorter run. The repair: delinquent 5471s filed with reasonable-cause statements through the appropriate procedure, starting the three-year closure countdown; the open-year register she leaves with shows every year, its status, and the date each finally closes — the first time in a decade the question has had a knowable answer.

Official sources

"Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years." The IRS conducts audits "either by mail or through an in-person interview." — Internal Revenue Service, IRS audits, https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits

"It is important to emphasize that when we select your return for review, that it does not represent a tax audit." The CRA checks returns through its Pre-assessment Review, Processing Review, and Matching programs — the Matching Program comparing a return "to information provided by third-party sources, such as employers or financial institutions." — Canada Revenue Agency, Review of your tax return, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/review-your-tax-return-cra.html

Practitioner note

Limitation analysis is the profession's quiet leverage: half the old-year proposals we see fail at the period computation before merits are ever argued, and half the catch-up urgency we counsel comes from clocks that never started. The three artifacts we maintain for every cross-border client — permanent file, six-year archive, open-year register — cost an hour annually and answer the two questions that otherwise get answered by fear: what can still be reassessed, and what closes when.

See also: For what an IRS audit of a US expat in Canada actually looks like, see what an IRS audit of a US expat in Canada actually looks like; and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the limitation program — open-year registers with computed closure dates, statute-barred defences and waiver scoping in audits, and the delinquent-filing repairs that finally start the clocks on held-open years. See cross-border pricing or book a call.