What is a Notice Of Assessment - NOA
A notice of assessment (NOA) is an annual statement sent by the Canadian Revenue Agency (CRA) to taxpayers detailing the amount of income tax they owe. It includes details like the amount of their tax refund, tax credit and income tax already paid.
BREAKING DOWN Notice Of Assessment - NOA
The NOA also lists deductions from total income, total non-refundable federal tax credits, total British Columbia non-refundable federal tax credits and other figures. These are calculated based on the information tax payers submit on their tax returns.
The NOA lists any changes including corrections made to the information they submitted. It also indicates whether an individual or business is subject to an audit. Tax filers have within 90 days of the date noted on the NOA to make a formal objections online or by mail. They would have to provide supporting documentation, but they won't owe any disputed tax payments until the CRA completes its investigation.
The NOA also provides important information about a tax filer's Registered Retirement Savings Plan (RRSP).
Registered Retirement Savings Plan (RRSP) Deduction Limits on a NOA
A NOA lists the maximum contributions an individual can make toward his or her RRSP for the following year. This amount is equal to 18% of the previous year's earned income or the maximum amount for the current tax year, whichever is less.
A tax filer can claim these contributions as a deduction from overall taxable income. For example, if someone who earned $50,000 in income made contributions of $1,000 to his or her RRSP for a given year, that person would be taxed on income of $49,000.
If a person doesn't meet his or her maximum contribution limit for a given tax year, that individual can roll over the amount left over into the following year. Say a person's contribution limit for a given tax year was $15,000 but he or she made no contributions toward an RRSP that year. The following year's limit would be that person's maximum contribution limit for the year plus $15,000.
Tax payers are not required to take contributions as deductions in the tax year they make them. They can postpone RRSP deductions until the following year if they expect to have a significant increase in income which will push them to a higher tax bracket. These are known as unused contributions. The move would allow them to claim a larger reduction on a bigger tax bill.
However, individuals would owe a tax if unused RRSP contributions from prior years and current contributions exceed the RRSP deduction limit shown on their latest NOAs by more than $2,000. The tax is 1% per month on the excess amount.
Tax payers can also make deductions from certain transfers they make into their RRSPs without affecting their deduction limits. The CRA lists these as certain lump-sum amounts from a non-registered pension plan relating to services rendered during a time when a tax filer was a non-resident of Canada, eligible pension income from an estate or testamentary trust; and amounts received from foreign retirement arrangements including United States Individual Retirement Accounts (IRA)s.
For more information about RRSP deductions and NOAs, visit Canada.Ca.