Free Consultation: 1-(855) 1-(855) 474-2956 474-2956 1-(855) 474-2956 Guide to Objecting to a CRA Assessment 1
Table of Contents Content Page Overview 3 Chapter 1: The Objection Process 4-8 Chapter 2: Time Limit and Extensions 9-10 Chapter 3: Appeals 11-12 Chapter 4: Timelines What to Expect 13-15 Conclusion 16 Author Bio 17-18 2
Overview Under the Income Tax Act, the Canada Revenue Agency (CRA) can assess or reassess your tax return. If they determine that you owe they will assess the tax debt and then leverage penalties and interest retroactively. When the assessment is complete, CRA sends out a notice of assessment or notice of reassessment which outlines what CRA believes you owe, and why. If you have been assessed or re-assessed on a past tax return and disagree with any part of the assessment you can file a Notice of Objection. Even if you agree with the taxes owed but object to a penalty that was assessed you can object. A very common example is gross negligence penalties. When CRA reassesses a tax return and finds an error on the part of a taxpayer, they will often assess a gross negligence penalty. You can object to this penalty by filing an objection and proving why you were not negligent. This defence exists even if you filed the tax return yourself. This e-book will guide you through the process of preparing and filing a Notice of Objection. After reading, you should better understand when and how to file a Notice of Objection and what to expect afterwards. Talk to an Ex-CRA Tax Expert or A Tax Lawyer About Filing A Notice of Objection 3
Chapter 1: The Objection Process 4
The Objection Process When you decide to object to a Notice of Assessment, there is a formal process that needs to be followed. If you disagree with an assessment or reassessment issued by CRA, here is the basic process as it relates to filing a Notice of Objection. Step #1: Am I On Time? Your Notice of Objection must be filed within 90 days. Notices of objection are date stamped when CRA receives them. However, those sent by first class mail are considered received on the date they were mailed. What do I do it is past 90 days? If 90 days have passed you may write to CRA and request an extension to file your objection. Your request should indicate why you missed the 90 day limit and specify the amount of time you need to prepare and file your objection. CRA may approve extensions up to 1 year from the expiry of the initial 90 days. If CRA rejects the request it s not over but you will likely need professional representation to get the matter re-opened. Step #2: Gather Your Evidence! The more you can prove the better. If your objection involves proving that CRA has erred, is missing some key information or is flat out wrong, it will be important to present evidence that supports your objection. Your evidence should be organized and labelled. 5
Step #3: Complete the Notice of Objection Form (Form T400A or E413). When you complete the form, include all relevant information with as much detail as possible. This includes submitting evidence as mentioned in Step #2 which could include photocopies of letters, invoices, or any documents which support your objection. Also include a copy of the original Notice of Assessment. If the Notice of Objection form does not provide enough space for you to outline all the facts in support of your objection, feel free to continue on a separate piece of paper and indicate on the Notice of Objection form that there are extra pages attached and the number of pages. Something to keep in mind: You need to file a separate Notice of Objection for every assessment you are objecting to. The quality of the objection is highly important for two reasons: 1. You want your objection to succeed. 2. In the event that it does not succeed the basis for escalating your appeal is directly rooted in what you included and excluded from your objection. So while the objection may seem manageable it is inexperience that kills your opportunity to be treated fairly in a complex system. Step #4: Prepare Your Objection to be Filed. Make a copy of the Notice of Objection form, additional pages and evidence as you are submitting your application to CRA. It is important to have a complete copy of your submission. 6
Step #5 - Mail Your Complete Notice of Objection Form to CRA. We always recommend sending any important notices or submissions to CRA by registered mail so that you have proof that they received it. You can send your Notice of Objection to one of the following addresses (the address you choose will depend on your postal code) Taxpayers with a postal code starting with A to P: Canada Revenue Agency Eastern Intake Centre Sudbury TSO/TC 1050 Notre-Dame Avenue Sudbury, ON P3A 5C1 Taxpayers with a postal code starting with R to Y: Canada Revenue Agency Western Intake Centre Burnaby-Fraser TSO 9737 King George Boulevard P.O. Box 9070, Station Main Surrey, BC V3T 5W6 Step #6: CRA Review of the Notice of Objection. Once CRA receives your Notice of Objection, a letter of acknowledgement is sent to you. They may also send you a notice that your objection is not being considered and the reason why. A very common instance of this is when your objection was not filed within the 90 days and you did not obtain an extension. Following this, the appeals officer assigned to your file will review your objection and contact either you or your representative to discuss the 7
objection. This may involve asking for further information or clarification. This helps to reach a quick resolution, if possible. While the Notice of Objection is under review, CRA will halt collection efforts as it relates to a tax debt assessed for the tax year(s) in question. If the objection is ultimately rejected CRA will resume collection action and interest will be added retroactively for the months that the objection was under review. Please note that for assessments under the Excise Tax Act such as HST, CRA s collection efforts will not be stopped by the filing of an objection. It is only for assessments issued under the Income Tax Act that collection activity is held in abeyance. Step #7: You Are Notified of The Result. After your file has been reviewed completely, and all documents examined, you will be notified of the decision. Results of CRA s Decision When you object to an assessment, there are no guarantees regarding the outcome. After the appeals office has gone over your objection, and hopefully after having correctly considered all the facts and reasons, one of the following three decisions will be rendered: 1. The objection is allowed in full. When the appeals officer decides that the objection is allowed in full, this means that the amount in dispute is reversed. This may be the outcome if your objection included the submission of additional information that CRA did not have when the original assessment was done. The tax amount is reversed, as are penalties and interest. 8
2. The objection is allowed in part. When an objection is allowed in part, this means that the appeals officer has agreed to some elements of the objection, but not all of them, and thus the amount owed is adjusted. In this case another Notice of Assessment is issued, reflecting the changes determined by the appeals officer. 3. The objection is not allowed. If the appeals officer determines that the objection is not allowed. In this case, the original amount listed on the first Notice of Assessment is upheld and the taxpayer is required to pay that amount in full plus the additional interest while the objection was under review. 9
Chapter 2: Time Limits and Extensions 10
Time Limits and Extensions You must file a Notice of Objection within 90 days of the original assessment date. If you do not meet the 90 day deadline, you will be notified that your objection is invalid. So what if you have missed the 90 day deadline? Are you out of luck? Not necessarily. Here is what to do if the 90 day time limit has passed. 1. Apply to CRA to extend the amount of time you have to file the objection. As mentioned, the CRA will consider a request to late-file your objection for up to 12 months from the expiry of the initial 90 days. 2. If CRA rejects your application for an extension, you can apply for further consideration by the Tax Court of Canada. Conditions for Applying for Judicial Review To apply for Judicial Review of your extension request that was denied, you have to meet a number of conditions: 1. This must be the first submission for an extension. 2. You must demonstrate that, according to the application, it is just as equitable for the extension to be granted. 3. You must demonstrate that, if it had not been for the circumstances outlined in the application, you would have been able to file your objection within the 90 day time limit. 4. It must be clear that the application was made as soon as possible. 5. There must be reasonable grounds for the objection or appeal. 6. You must comply with all the court filing processes and procedures. 11
Chapter 3: Appeals 12
Appealing a Decision If your Notice of Objection is rejected all or in part you may appeal the objection. Appealing the outcome of an objection in court is a legal process through the court system. We recommend seeking the professional advice of an organization that specializes in such proceedings. This e-book serves as a guideline. We cannot provide legal advice as it relates to the process of appealing an objection in Tax Court. If you are seeking a referral to a tax lawyer please feel to contact the author who can assist you in preparing the documents that the lawyer will need (saving legal fees) and recommend lawyers we know have success in your type of tax appeal. Talk to an Ex-CRA Tax Expert or A Tax Lawyer About Filing A Notice of Objection 13
Chapter 4: How Long Will This Take? What to Expect 14
Timelines When you file an objection to a Notice of Assessment, the amount of time it takes to have CRA resolve the matter depends on a number of different factors. Typical response and conclusion times vary, but it is not uncommon to have to wait several months or even years until you receive a decision. The circumstances surrounding your objection will impact the length of time you wait for a decision from CRA. Where another taxpayer has objected on very similar grounds and the CRA rejection has been appealed, CRA will wait until the court process is completed (with appeals to yet higher courts this can take years as many who were involved in tax shelters have found out). CRA may or may not notify you that this is the reason for the delay. The time it takes CRA to review an objection application can be lengthy. It is the taxpayer who pays the price for these time delays. Although the objection process causes any collection action to cease, the interest charges still accumulate (compounded daily). If your objection is accepted, this is not an issue, as the amount will be reversed. However, if your objection is not allowed, you will be expected to pay the penalties and interest calculated back to the date that you received the original assessment. Options After a Final Decision Has Been Made Above we discussed the option of an appeal for judicial review. If you find yourself in a situation where the objection is disallowed and due to the long time until the decision was made the amount of interest (and penalties owing) are significant you can fight the unfairness of the interest applied. 15
You may apply for Taxpayer Relief of the interest and penalties accrued during that period citing error on the part of CRA. Also, if you have suffered an extraordinary circumstance that led to the tax debt, a late filing, an error or an inability to pay, this also may be grounds for Taxpayer Relief. Some examples include: medical problem or death of an immediate family member, extreme financial hardship, a disaster like a fire or flood, or an error on the part of CRA. 16
Conclusion If you have received your Notice of Assessment or re-assessment and disagree with the outcome of the assessment, you do have options. You have the right to disagree with an assessment and provide your reasoning through an objection. As this e-book has shown, filing an objection is a formal process, and you have to meet certain criteria to qualify. After reading this e-book, our hope is that the entire process is easy to understand and navigate, whether you want to object directly, obtain an extension, or file an appeal. Don't Fight The CRA Alone! We Can Help! Over 65+ Years of Inside CRA Experience 17
Author Bio James Bell is the Director of Tax Solutions at Tax Solutions Canada. A member of the Farber Financial Group, Tax Solutions Canada is a firm that helps individuals and businesses struggling with tax problems ranging from small matters to the most complex negotiations. Prior to James tenure at Tax Solutions Canada, James worked in increasingly senior roles across many departments at Canada Revenue Agency, including but not limited to: Audit, Investigations, Enforcement and Appeals. Through Tax Solutions Canada, James brings to bear his outstanding technical knowledge, negotiation skills and deep understanding of the CRA processes and mindset to assist individuals and businesses who: Are at risk of being accused of tax evasion Are being notionally assessed by CRA Are dealing with CRA audits and/or investigations Want to file an Objection to an assessment or an audit Want to apply for Taxpayer Relief Want to apply for Voluntary Disclosure Want to negotiate regarding the removal/reduction of enforcement action such as wage garnishments and liens on houses Want to negotiate payment plans and more In addition to working with the public, Tax Solutions Canada also supports accountants, legal professionals, mortgage brokers and other financial professionals in helping their clients put an end to their tax problems. 18
If you would like to contact James for a free consultation: Call: 1-888-868-1400 1-(855) 474-2956 Email: jbell@taxsolutionscanada.com Disclaimer This e-book was created on January 15, 2014. All information contained in this e-book is based on research performed up to and including the above noted date. This e-book provides only a brief overview of the subject matter discussed and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific advice should be obtained from a tax professional before making any application to Canada Revenue Agency. 19