After businesses and individuals file their returns with the CRA, the agency processes the returns, which involves making a decision as to whether to audit the return or to process it as filed. The vast majority of returns are processed as filed, while inconstancies or other red flags cause certain returns to be diverted to audit.
Typically returns are processed within a month or so. During peak times this increases, and due to COVID-19 it is not clear what sort of an effect this will have on processing time. Either way, the CRA is required to process returns “with all due dispatch”, which essentially means as fast as they can, given the circumstances.
After the agency processes a return, it issues and sends the taxpayer a “Notice of Assessment” which indicates how much tax the taxpayer owes.
A Notice of Assessment is issued after GST/HST returns, personal income tax returns (for sole proprietors) and corporate tax returns are processed.
When there are no errors found on the return, and when the taxpayer has filed the return on time, the amounts printed on the notice of assessment correspond precisely to the amounts provided by the taxpayer. When sometimes when there are errors on the return, the CRA changes the figures on their own. If the returns have been late-filed, the taxpayer will also see penalties and interest on the notice of assessment.
If a taxpayer disagrees with the assessment, they have an option to appeal the decision, the first step of which begins by the filing of a “Notice of Objection” (T400A), which can also be filed online. This begins the entire process. This Notice of Objection must be filed within 90 days and has to clearly explain in writing the grounds for the appeal. If the objection is late, the taxpayer may request an extension for up to a year. After that, no dice.
Once the Notice of Objection is filed, the taxpayer generally will wait for up to a year for an appeals officer to be assigned to the case. The appeals officer will consider the taxpayer’s position, arguments and evidence and will render a decision. Either the appeals officer agrees in whole or in part with the taxpayer, in which case a reassessment is issued, or in other cases the appeals officer disagrees with the taxpayer and a “notice of confirmation” is issued.
During this entire appeals process, interest continues to accrue on the debt, as the CRA is presumed to be correct until proven otherwise.
If the taxpayer files an objection in respect of corporate tax or personal tax (in the case of a sole proprietorship), collections activity ceases until the case is resolved. The amounts in question, considered to be “disputed amounts”, are non-collectible. However trust amounts such as GST/HST and source deductions remain collectible even though in dispute.
The biggest question in terms of challenging the CRA is whether to take the DIY approach or whether to hire a professional to assist. If the case is fairly straightforward you may choose to do it on your own. However where the amounts are more significant or where the issue is more convoluted, you should likely engage a tax professional to assist you.
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