Often when an assessment or reassessment is issued to a taxpayer, they may disagree with the amount owing, the application or denial of certain deductions or credits, or they may be distraught to find that expensive penalties and interest have also been levied. Those that wish to have their reassessment reconsidered have the right under the Income Tax Act, the Excise Tax Act and other statutes to file an objection internally with the Canadian Revenue Agency “CRA”.
Limitation Period – when an assessment or reassessment is issued, the respective act deems it to be a valid and payable debt by operation of law – regardless if the assessment is factually correct. The only way to overcome this is to have it replaced by way of a subsequent reassessment. Further, the only way a taxpayer can force the CRA to reassess is through the objection and appeal process, and timelines for doing so are very short and strict. Generally speaking, when a reassessment is issued for income tax or GST/HST, the taxpayer has a period of just ninety (90) days within which to formally object as of right. Time is thus very much of the essence.
Extension of Time – if this first deadline is missed then there is still a statutory mechanism whereby which a taxpayer can file an objection. So long as a taxpayer files an Application for an Extension of Time within which to File a Notice of Objection within one year of the expiry of the initial ninety (90) day deadline to object, the CRA may still accept the formal objection as valid.
It should be noted that an extension of time application is not approved as of right – rather, the acts contain certain conditions precedent that the taxpayer must demonstrate they have met in order to have their objection approved. In a nutshell, the taxpayer must prepare the formal objection and application to be filed together and the taxpayer must be able to prove :
- that they were unable to act or instruct another to act to file the objection;
- that they had a bona fide intention to object to the reassessment;
- that it would be “just and equitable” to allow the extension of time; and
- that the application is made as soon as circumstances permit.
If the taxpayer can prove these conditions have been met, then the language is mandatory – the CRA must allow the application and accept the objection as valid.
The Appeals Division – once the objection has been filed and accepted as valid, it will typically be placed into an internal queue at the Appeals Division of CRA, and an Appeals Officer will be assigned to review and discuss the reassessment with the taxpayer. The process of waiting for an officer to be assigned can often take several months, and in some cases years, depending on the complexity of the issues under objection and the current caseload of the CRA.
Appeals Officers themselves are generally the more experienced agents of the CRA. They have often cut their teeth in the collections and audit divisions and are trained to be impartial when reviewing a file and coming to a decision. They are generally more collaborative in their approach to reviewing a taxpayer’s file than the audit division, though for certain issues they must follow departmental mandates when issuing decisions.
Once assigned, the Appeals Officer will typically review the file and then make contact in writing with the taxpayer to discuss their initial impression of the file and to request any additional information they may require to form their decision. After a few rounds of exchanging correspondence they will generally prepare their formal decision by way of a “proposal letter” which will state their position and provide the taxpayer one last chance to respond if they continue to disagree.
Once a final decision is made, the Appeals Officer has two choices on the outcome. First, they can direct that a subsequent reassessment be issued to either completely eliminate the previously incorrect taxes levied, or to alter them to some lower amount. Alternatively, if they disagree with the taxpayer and intend to uphold the reassessment in dispute they will issue a formal “Notice of Confirmation”, stating the CRA’s position that the tax was assessed correctly. Once a Notice of Confirmation is issued, the taxpayer’s only recourse is to appeal to the Tax Court of Canada, which must be done within a ninety (90) day period.
The Relationship Between Objections and Appeals – the process related to filing an appeal is discussed in our article on tax appeals. However, it should be noted that it is a formal requirement that a taxpayer must first file a Notice of Objection if they intend to proceed to the Tax Court of Canada – without an objection the Tax Court of Canada does not have the jurisdiction to hear an appeal. In certain circumstances, a taxpayer may wish to appeal “directly” and to avoid dealing with the CRA directly. In this case, the Income Tax Act provides that once a ninety (90) day period has elapsed and the CRA has not issued a decision to the taxpayer on their objection that they may then proceed to file an appeal. Given the administrative backlog at the CRA an objection is almost never decided within this timeframe, and thus taxpayers can often appeal quickly – but must be aware that the formal requirement for filing an objection is a strict one. Without filing an objection within the time limits described above, all rights of appeal are lost.
Proper Experienced Advice – if you disagree with a reassessment and wish to dispute the amounts, proper advice and representation is invaluable to ensure both that the formal requirements of the acts are met, and that you are in the best position to present a logical and winning case to the Appeals Division of CRA. The tax lawyers at Devry Smith Frank LLP have years of experience in all types of objections and can advise you expertly, keep professional costs down and maximize your chances of success.
We offer multiple convenient locations in Toronto, Whitby, Barrie and more to serve our clients with ease. Find the office closest to you by calling us at 416-449-1400 or by visiting our locations page.