By the end of June, all individual taxpayers should have filed their 2015 income tax returns and most will have received a Notice of Assessment (NOA). This assessment will outline the Canada Revenue Agency’s (CRA’s) conclusions with respect to that taxpayer’s income and tax position for the year. In most cases, the Notice of Assessment won’t vary a great deal from the information provided by the taxpayer in their return. When it does vary, and the change is to the taxpayer’s detriment, taxable income assessed is greater than the amount reported by the taxpayer, or a deduction or credit is denied, then the taxpayer has to decide whether they want to dispute the CRA’s assessment.
Where the amounts are significant enough and the taxpayer genuinely believes that the CRA’s assessment is in error, the next step is to file a Notice of Objection. This formally advises the CRA that the taxpayer is disputing their tax liability for the taxation year in question. Not incidentally, the filing of an Objection also stalls most efforts undertaken by the CRA to collect taxes, which it considers owing for the taxation year under dispute. It is important to note that if the taxpayer is eventually found to owe the amount in dispute, interest will have accumulated in the interim and will have to be paid.
There are two major exceptions to the deferred collection rule.
- Tax collection efforts by the CRA are not deferred where the amounts in dispute are amounts that the taxpayer was required to withhold and remit to the CRA, such as employee income tax deductions at source.
- The CRA is required to postpone collection action on only 50% of the amount in dispute, if that dispute involves a charitable donation tax credit or deduction claimed in connection with a tax shelter arrangement.
When filing an Objection there is a time limit for when it needs to be filed by. That being said, it is reasonably generous. Individual taxpayers must file an Objection by the later of 90 days from the mailing date of the Notice of Assessment (the date found at the top of page 1) or one year from the due date of the return which is being disputed. So, for 2015 income tax returns, the one-year deadline (which is usually, but not always, the later of those two dates) would be April 30, 2017 (or June 15, 2017 for self-employed taxpayers and their spouses).
As with most things related to taxes, it’s best not to put it off. At the very least, if the taxpayer is ultimately found to owe some or all of the taxes assessed by the CRA, interest will have accrued on those taxes for the entire period since the filing due date and, if the filing of the Objection is delayed, the CRA may well have already commenced its collection efforts. Certainly, if the deadline is imminent, it’s necessary to file a Notice of Objection in order to preserve the taxpayer’s appeal rights, even if discussions with the CRA are still ongoing.
Taxpayers who have registered with the CRA’s online services feature My Account can file their Notice of Objection online at www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html. The taxpayer will have to provide information with respect to the assessment being disputed as well as the reasons why the assessment is being disputed. They will then submit those reasons by clicking on the Submit button at the bottom of the "Register my formal dispute – review" page.
Enhancements to the My Account mean that taxpayers who are disputing their tax assessment can now scan and send supporting documents relating to that dispute to the Agency. If the CRA has requested that the taxpayer provide specific documents, he or she will have been provided with a case or reference number which is used to submit the document or documents.
Where that’s not the case, and the taxpayer doesn’t have a case or reference number, it is still possible to submit documents online. In either case, there are some technical requirements that must be met when scanning and sending documents to the CRA. Each file submitted must have a unique name and must be in one of a number of file formats, many of which will already be familiar to most taxpayers (e.g., .doc, .pdf, and .jpg).
Furthermore, the total size of the documents submitted can’t exceed 150 MB. Once documents are successfully submitted, the taxpayer will receive a confirmation number and a reference number. That reference number (or the one previously provided by the CRA) can be used at any time to submit additional documents.
While filing a dispute through My Account is certainly faster than mailing a hard copy of the Notice of Objection, not all taxpayers want to use that option. More specifically, taxpayers who are not already registered with My Account may not wish to undertake the registration process just to file a single Notice of Objection. Taxpayers who choose instead to mail a hard copy of a Notice of Objection can find the CRA’s standardized form – the T400A Objection – on the Agency’s website at www.cra-arc.gc.ca/E/pbg/tf/t400a/README.html).
Taxpayers aren’t obligated to use the CRA’s official Notice of Objection form – any communication which makes it clear that the taxpayer is objecting to his or her Notice of Assessment will do. Nonetheless, there’s no reason not to use the standardized form, and there are benefits to doing so.
Using Form T400A will make it clear to the CRA that a formal objection is being filed, it will present the necessary information in a format the Agency is familiar with and it will also mean that no required information is inadvertently omitted.
It’s also helpful to include a copy of the Notice of Assessment which is being disputed. Taxpayers should also consider ensuring proof of both delivery and time of delivery by sending the form in a way that allows them to track the documents and prove that delivery occured (e.g., registered mail or courier). The CRA has two appeal intake centres, which are as follows:
Western Intake Centre
Vancouver Tax Service Office
9737 King George Boulevard
PO Box 9070, Station Main
Surrey, BC
V3T 5W6
Eastern Intake Centre
Sudbury Tax Service Office
1050 Notre-Dame Avenue
Sudbury, ON
P3A 5C1
Taxpayers with a postal code starting with letters A to P should send their objection to the Eastern Intake Centre, while those with a postal code starting with the letters R to Y should send their objection to the Western Intake Centre.
Eventually (with at least several weeks being the usual time frame) the CRA will respond to the Objection. In the course of making its decision, the Agency may or may not contact the taxpayer for further discussion of the issues in dispute. Should the taxpayer be contacted, they may be asked to provide representations outlining their position, in writing or at a meeting.
Through such representations and meetings, it may be possible for the taxpayer and the CRA to come to an agreement on the taxpayer’s tax liability. In either case, the CRA will either confirm its original assessment or change it. If the original assessment is changed, the CRA will issue a Notice of Reassessment outlining the changes. If the taxpayer continues to disagree with the CRA’s position, the next step is an appeal to the Tax Court of Canada, which must be filed within 90 days after the CRA issues its assessment or reassessment.
While, in many instances (generally where amounts in dispute are relatively small), taxpayers are allowed, by law, to represent themselves before the Tax Court, it’s generally a good idea, once things reach this point, to consult a tax lawyer before taking that next step.
The CRA also publishes a useful pamphlet entitled "Resolving Your Dispute: Objection and Appeal Rights Under the Income Tax Act", and the most recent release of that publication can be found on the CRA website at www.cra-arc.gc.ca/E/pub/tg/p148/README.html.
