Why might a tax dispute with the CRA occur?
Tax disputes with the CRA occur where the CRA challenges, or considers challenging, a statement or omission in a person's taxes. That person may then contest the CRA's conclusion. The dispute typically begin with an audit, review, arbitrary assessment, or reassessment, and may continue under the CRA's internal procedure or into the courts.
What is a notice of assessement?
A Notice of Assessment is a statement sent by the CRA to taxpayers explaining tax owing for a certain period, and may be issued whether or not an individual has filed a return.
What is a notice of re-assessment?
A Notice of Reassessment is a second statement sent by the CRA which changes the CRA’s initial assessment. This may be as a result of an individual amending their return or as a result of an audit and may increase or reduce the tax owing.
When is a Notice of Assessment Issued?
The CRA will issue notices of assessment after people file their tax returns for a period. Typically, the CRA will accept the claims in returns when sending the initial assessment, but they may change some matters unilaterally or refrain from assessing until they conduct a review.
CRA may issue an assessment "arbitrarily", that is, without the filing of a return, typically when a taxpayer has failed to file taxes in a number of years.
When is a notice of re-assessment issued?
A Notice of Reassessment can be issued in a variety of circumstances. Reassessments typically follow the conclusion of an audit, particularly where taxpayers are not represented. The CRA may even issue Reassessment without a formal audit or even contacting you, although this is somewhat rare. Where taxpayers amend their own returns to reduce the balance owing, CRA will typically send a reassessment.
What is a third party assessment for director's liability?
A third party assessment for director's liability can occur when the director of a corporation is assessed together with the corporation for amounts owing that relate to amounts held in trust for the government. The most common issues are HST and employees' payroll deductions, along with related interest and penalties.
What is a "derivative assessment"?
Section 160 of the Income Tax and Section 325 of the Excise Tax Act allow the government to "chase" taxes owing between taxpayers where those taxpayers transfer property to others within arm's length of themselves, such as to businesses they operate or family members.
What should I do if disagree with the the CRA's notice of assessment or re-assessment?
If you dispute the CRA's decision in the Notice of Assessment or Reassessment, you can file a Notice of Objection. Notices of Objection formally contest an assessment and initiate the government's internal appeals procedure. For most issues, taxpayers have 90 days to object to an assessment, although there are some exceptions (notably for payroll issues). In most instances, taxpayers can request an extension within one-year after the expiry of the 90-day objection period. Along with audits, Notices of Objection are the bread-and-butter of tax disputes, and are necessary preconditions of appeals to the Courts. Tax dispute lawyers prepare notices of objection as a matter of course, and will combine supporting documents, your explanations, and legal submissions to convince the CRA's officer that the initial reassessment was incorrect. After 90 days, if the CRA has sent you a decision, you may be able to appeal directly to the tax court of Canada.
What if I disagree with the CRA's decision to my Notice of Objection?
If, after you send a notice of objection, the CRA either confirms the reassessment or sends an additional reassessment, you have a right to appeal to the Tax Court of Canada within 90 days. After this, you may still be able to appeal by including with your appeal an Application for an Extension of Time within up to one year from the expiry of this 90-day period. This modestly increases the cost of drafting an appeal and involves some risk, depending on the circumstances, of the CRA and their lawyers contesting the application to extend, which increases the cost substantially and may prevent you from appealing.
A Notice of Appeal to the Tax Court of Canada must be filed within 90 days from the date of the issuance of the decision of the internal CRA appeal (also called an objection). If you miss this deadline, there are mechanisms to file an Application for an Extension of Time to allow an additional 12 months to file the Tax Court Appeal. For more information about filing an appeal to the Tax Court of Canada, click here .
