Dispute an unfavourable tax assessment

Think Canada Revenue Agency (CRA) got something wrong in your latest tax assessment? It is possible to dispute it. Here’s how.

• Start by contacting whichever CRA tax centre processed the return.

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  The full list of CRA tax centres can be found at cra-arc.gc.ca/cntct/tso-bsf-eng.html

• File a Notice of Objection within 90 days. Even if you’re already in talks with CRA, submit within 90 days or you forfeit the right to appeal.

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  The Notice of Objection is form T400A.

  Don’t leave anything out.

  It can be hard to add additional arguments if it’s not in the notice of objection.

  –Bruce Ball, CA, national tax partner with BDO Canada LLP

• Write the notice of objection, but have a lawyer review it.

  Get it right because it’s likely to be the only document the judge actually reviews.

  Making the argument

  Get help from your financial advisor because they can be in a better position to write the objection because they can add detail. Ball adds, ensure your advisor asks a lawyer, “If you were to take this case to court, what arguments would you want to make, and how should we be doing the notice of objection to give you as much flexibility as possible if the case does go to court?”.

  Wait. It can take six to 12 months for a CRA review.

  You lose	You win!
  The appeals officer disagrees and confirms the original assessment. You have 90 days to appeal to the Tax Court of Canada. Keep going.	The appeals officer agrees, adjusts the tax return, and issues a notice of reassessment. You’re done!

• Get ready for court

  Ensure the CRA’s notice deals with tax matters from the last three years. If older, CRA must show mistakes due to negligence, carelessness or fraud.

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  Triple check the dates.

  “I’ve seen cases where the CRA will reassess someone and not mention that it is beyond the three-year period,” says James Rhodes of TaxationLawyers. “You could end up in court fighting over income or capital gains if you don’t raise the three-year issue in the Notice of Objection, because the government won’t raise it if you don’t.”

• For amounts under $12,000 per year, in federal tax and penalties for a taxation year, excluding interest, opt for the informal procedure.

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  Do a cost analysis.

  If you have a solid case, compare total funds recoverable with an estimate of fees. Cases that go to court cost more. Factor that in.

  “If it is a question of whether the matter is contrary to CRA policies and practices, then it is less likely to be settled because questions of law may impact many more taxpayers,” says Paul Lynch, tax partner with KPMG LLP in Ottawa.

  CRA’s stake rises as the dispute works through the process. So, although it has resources, CRA is motivated to resolve matters early.

  If it makes it to court, there’s the risk CRA could lose, and that would set a precedent. So they’ll often try to settle, say experts, which is to a taxpayer’s advantage if the amounts are small enough—say, $10,000. After all, getting rid of a $50,000 tax bill could cost $150,000 if it goes to court.

  Advantage! You can appear before the judge. You don’t need a lawyer!

  For larger sums, you’re stuck with the general procedure.You need a lawyer. OPTION Or, get the yearly total under $12,000 by paying tax on the difference and keep the discussions informal. This formula can be applied to multiple tax years.

• 30, 60 or 90 days

  Get a copy of your file from CRA’s Access to Information and Privacy Of fice. It contains all correspondence related to the case. Don’t wait until the court date’s set to request the file; the process takes at least 30 days, and can take 60 to 90.

Our sources: Bruce Ball, national tax partner, BDO Canada LLP, Toronto; Gerald Grenon, partner, KPMG Law LLP, Calgary; Paul Lynch, CA, KPMG, Ottawa, Ont.; James Rhodes, TaxationLawyers, Kitchener, Ont.

Compiled by Christopher Mason, a Toronto-based financial writer.

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