This article is taken from our quarterly bulletin, Canadian Overview, published by Canadian member-firms of Moore North America. The articles in our bulletin are a part of our mission to become the ultimate ally in your success by keeping you informed about current events.
The ability to object to a Canada Revenue Agency (“CRA”) assessment is an integral part of the Canadian tax system. There are many reasons for filing an objection. Some of the common reasons include the following:
- Uncertainty whether the CRA will accept a request to adjust an income tax return; and
- The CRA has changed a taxpayer’s income tax liability after completing an audit of a taxation year.
Deadline to file a Notice of Objection
It is crucial to understand the time limitations before filing a notice of objection. Individuals and graduated rate estates (GRE) must serve the notice of objection to the Chief of Appeals at a CRA Intake Centre on or before the later of:
- One year after the taxpayer’s filing-due date for the year; and
- 90 days after the date of a notice of assessment.
Corporations and other taxpayers must serve the notice of objection within 90 days after the date of the notice of assessment.
If a taxpayer misses the deadline to object, they can still apply to the CRA within one year of the deadline for an extension of time. In the late submission, the taxpayer must explain why the objection is being late-filed. CRA has discretion as to whether to accept the late-filed election. If the CRA denies the application, you can appeal to the Tax Court of Canada.
Format for Completing a Notice of Objection
Taxpayers can file an objection online or by mail. Although the Form T400A is commonly used, there is no requirement to use a prescribed form when submitting an objection in writing.
At a minimum, the objection should state that the taxpayer is objecting to a specific assessment. Based on experience, it is generally advisable to state all the relevant facts and reasons for objecting. This will help expedite the process once a CRA Appeals Officer has been assigned to the file. There may also be an opportunity to provide additional information to the Appeals Officer to review - even information that may not have been available at the time of the audit.
Large Corporations
Large corporations are required to provide extensive detail when they file a notice of objection. A corporation is defined as a large corporation if the total taxable capital employed in Canada, together with related corporations, exceeds $10 million at the end of the tax year.
Processing by the CRA
The CRA typically sends out an acknowledgement letter within 30 days of receiving a notice of objection. The Intake Centre will assess a level of complexity to each objection. Based on its most recent Service Standards, the CRA’s target for processing the objection is 180 days for a low-complexity objection and 365 days for medium complexity. Large-file objections averaged 690 days as of November 2018.
A notice of objection is reviewed by a CRA Appeals Officer. It is important to note that the Appeals Division is independent of the Audit branch. The Appeals Officer is supposed to take an objective approach to reviewing the notice of objection.
Payment of Disputed Amounts
Once an amount has been disputed, a taxpayer does not have to pay the disputed tax, interest or penalty while they are waiting for the outcome of the objection. However, interest continues to accrue on the disputed taxes during this process. It is generally advisable to pay the outstanding balance in order to avoid extra interest charges.
Large corporations are required to pay 50% of the disputed amount when it objects to an assessment.
Final Thoughts
Filing an objection is an option available to all Canadian taxpayers when they disagree with an assessment after an audit. Objections often take more than one year to be considered due to a high volume already in CRA’s system. However, it is worth doing if you disagree with the auditor’s results.
Written by Daniel Wilson, CPA, CA, from Segal LLP. This document was written for our quarterly bulletin, Canadian Overview, published by Canadian member-firms of Moore North America.