The variety of amounts and kinds of income, deductions taken, and credits claimed on individual income tax returns filed by Canadians each spring is almost limitless. However, each of those returns has one thing in common, and that is that each will be assessed by the Canada Revenue Agency (CRA), and each will result in a Notice of Assessment summarizing the Agency’s conclusions with respect to the information filed by the taxpayer.
Most important, from the taxpayer’s point of view, the CRA will communicate the amount of federal and provincial tax it believes the taxpayer is required to pay for the tax year just passed. In the majority of cases, the return filed by the taxpayer is “assessed as filed” (i.e., the CRA agrees with the taxpayer’s summary of his or her income and tax situation for the year, with the exception of a few arithmetical corrections, or a small overpayment of Canada Pension Plan contributions or Employment Insurance premiums, and no further action is required by either the CRA or the taxpayer.
Sometimes, the Notice of Assessment will show an unexpected refund payable, and when that’s the case it’s a happy day for the taxpayer.
In a minority of cases, however, the Notice of Assessment will inform the taxpayer that additional tax amounts are owed to the CRA.
When that happens, the taxpayer has to decide whether to just pay up, or to dispute the CRA’s conclusions.
If this is the case, the first step is to determine just how the discrepancy arose.
Simple Error
In many cases, the cause is an inputting error made by the taxpayer in preparing the return. Even though the vast majority of taxpayers now prepare the annual tax return using tax return preparation software, errors can still occur.
Most often, those errors are made when the tax filer inputs the income and deduction figures which the software will use in computing tax payable for the year. No matter how good the software, it cannot compensate for inaccurate or missing information (e.g., from a T4 or T5 slip). And, since all such information slips are filed with the CRA, in addition to being provided to the taxpayer, it’s likely that the Agency’s systems will pick up on the discrepancy.
In these situations, it makes no sense to dispute an assessment where the error in reporting is the taxpayer’s and the CRA’s figures are correct.
It is a myth that taxpayers aren’t responsible for paying tax on income if they haven’t received an information slip for that income. Taxpayers are responsible for keeping track of and reporting all income received, and the fact that an information slip was never received or was lost doesn’t change that fact.
Lack of Entitlement
In other cases, the issues which led to the CRA and taxpayer reaching different conclusions are more substantive, often arising out of deductions or credits claimed by the taxpayer to which the CRA believes that taxpayer is not entitled.
Where the disagreement is a substantive one, the taxpayer has to decide whether to formally challenge the Notice of Assessment issued by the CRA.
How to Challenege Your Notice of Assessment
Before making that decision, however, the first step is always to contact the CRA for an explanation of the reasons why the change was made. While the information provided in the Notice of Assessment is a good summary of the taxpayer’s tax situation for the year, it may not always be clear from that summary precisely why the taxpayer and the CRA disagree on the amount of tax payable for the year.
At one time it was possible for the taxpayer to have a face-to-face meeting with a representative of the CRA at the taxpayer’s Tax Services Office, but such in-person services were discontinued a few years ago, and taxpayers who want more information about their Notice of Assessment must now call or write to the CRA.
If your income tax return has a discrepancy, start by calling the Individual Income Tax Enquiries Line at 1-800-959-8281. If that call doesn’t resolve your questions, write to or fax the Tax Centre which processed the return.
The name of that tax centre can be found in the top left hand corner of the first page of the Notice of Assessment, and the address and fax number of each such tax centre is available on the CRA website.
Communication with a Tax Centre by phone isn’t possible, as phone numbers for Tax Centres are not available to the public. If communication with the Individual Enquiries line and with the Tax Centre isn’t sufficient for resolving the differences, and you wish to pursue the matter, the next step is the filing of a Notice of Objection, which formally starts the appeal process with the CRA.
If you would like help determining the reason for the discrepencies or filing a Notice of Objection, contact us today!
