When a taxpayer files a tax return with Canada Revenue Agency (“CRA”), CRA will review the return and issue a “Notice of Assessment”. This document will identify what (if any) taxes are owing in the year, as well as any applicable penalties and interest. Typically, the content of the Notice of Assessment mirrors the content of the tax filing.
However, even once a Notice of Assessment has been issued, CRA may contact the taxpayer to request further information about the original tax filing and/or to commence an audit. This can result in a change to the original Notice of Assessment, referred to as a “Notice of Reassessment”.
For individuals, the general rule is that an income tax year becomes “statute-barred” three full years after the date of the original Notice of Assessment, meaning that CRA can no longer reassess past that point. For a corporation, the statute-barred period is dependent on whether or not the corporation was a “Canadian-controlled private corporation” (CCPC) at the end of the tax year. If the corporation is a CCPC, the tax year becomes statute-barred within three full years after the date of the original Notice of Assessment. For non-CCPCs, the statute-barred period ends four full years after the date of the original Notice of Assessment.
There are a number of exceptions to this general rule regarding limitation periods. For example, there is no limitation on a reassessment by CRA due to a misrepresentation by a taxpayer that is “attributable to neglect, carelessness, or willful default”. The limitation period can also be extended in certain circumstances to permit a carry-back of a loss.
If a taxpayer does not agree with CRA’s assessment or reassessment, the taxpayer has the right to file a “Notice of Objection”. The objection process is an internal appeals process that must be commenced within 90 days from the “date of mailing” noted on the Notice of Assessment or Reassessment (as the case may be). It is possible to get an extension of time to file an objection up to one year after the original filing deadline. In order to get an extension, the taxpayer must ask CRA to grant the extension and provide the following particulars:
1. Within the original time limit, the taxpayer was unable to file an objection or instruct another person to file an objection on his/her/its behalf or the taypayer had a bona fide intention to object;
2. It would be just and equitable to grant the extension;
3. The application was made as soon as circumstances permitted.
Extension requests are typically granted by CRA so long as they are made within these parameters. It is important to note that no right of objection exists past this “extension” period. Further, these deadlines apply regardless of whether the taxpayer actually received the Notice of Assessment/Reassessment in the mail. It is the responsibility of the taxpayer to make sure that CRA always has his/her/its most up-to-date contact information.
There is no prescribed form for a Notice of Objection. However, CRA does have a template form available at www.cra-arc.gc.ca/E/pbg/tf/t400a/t400a-fill-09e.pdf that can be used. In addition, if a taxpayer has set up a “My Account” through CRA’s website, it is possible to file an electronic objection through the “Register a Dispute” function on the website.
At a minimum, we suggest that the following information should be included in the Objection:
- The full name and contact information of the taxpayer. If the taxpayer is represented by a lawyer/accountant with respect to the objection, the advisor will need to make arrangements with the taxpayer to become “authorized” to make submissions on his/her/its behalf. For further information, please see:
- The tax year(s) subject to objection.
- A brief summary of what the taxpayer does not agree with and why.
- The following items should be attached to the Objection:
1. Duly-executed authorization forms (if taxpayer is represented by an advisor).
2. A copy of the Notice of Assessment/Reassessment that the taxpayer is appealing.
3. Any supporting documentation that helps to explain the taxpayer’s position.
This objection package can be mailed to the nearest Tax Services Office. In Saskatchewan, there are offices in Regina and Saskatoon. We suggest that the taxpayer keep a full copy of the objection package for their records. Approximately 30 days after filing the objection, the taxpayer will receive a form letter in the mail confirming that the objection has been filed, and asking the taxpayer to gather any additional documentation to ensure that he/she/it is ready to discuss the objection when an appeals officer is assigned.
The wait time for a CRA appeals officer to be assigned to review an objection varies depending on the nature of the tax matters at issue. The wait time can range from 3 months to over a year. An appeals officer can be assigned from anywhere in the country. As such, the taxpayer is typically communicating by phone or fax with the appeals officer to discuss the objection.
The appeals officer has three options in responding to the objection: (1) they can confirm the original assessment/reassessment and issue a “Notice of Confirmation” (i.e., no changes); (2) they can vary the original assessment/reassessment; or (3) they can “vacate” the original assessment/reassessment (i.e., the taxpayer wins).
If a taxpayer is not satisfied with CRA’s decision regarding the objection, the taxpayer has 90 days from the date of mailing of the Notice of Confirmation or Reassessment (as the case may be) to appeal to the Tax Court of Canada (“TCC”). Appeals to the TCC can be commenced online through the electronic filing system of the Court.
There are two different routes that can be taken with a TCC appeal, depending on the circumstances. The TCC’s “informal procedure” is an expedited process (akin to small claims procedure) that is available in the following cases:
- The aggregate of all amounts in issue does not exceed $25,0000; or
- The aggregate of all losses at issue does not exceed $50,000; or
- The only matter in dispute is the amount of interest assessed.
There are a number of benefits to proceeding by way of informal procedure, including that the matter proceeds to a hearing following the close of pleadings without a requirement for formal discoveries or document exchange, and that a taxpayer does not need to have legal representation.
However, if your matter does not qualify for the informal procedure, then the appeal will proceed pursuant to the “general procedure” rules, which requires the payment of filing fees, legal representation (in most cases), and a more expansive set of procedural and evidentiary rules. In addition, because general procedure appeals require the completion of formal document disclosure and examinations for discovery, it can take much longer to reach the hearing stage.
Though this article has focused on income tax objections and appeals, it should be noted that it is also possible to object to reassessments for GST, payroll, CPP, EI, entitlement to different tax benefits, and other determinations made by CRA. The procedure for objecting may differ depending on the type of reassessment at issue.
STEVENSON HOOD THORNTON BEAUBIER LLP
500 – 123 2nd Avenue South, Saskatoon, SK S7K 7E6
The information in this guide is not legal advice. We encourage you
to consult with your legal advisor for specific advice.
This article was originally published in Bar Notes.