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.
If a taxpayer disagrees with any tax assessment – GST/HST, corporate tax, or personal tax, they have an option to appeal the decision. The first step of the appeal 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.
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. Given that there is so much waiting time, I often chose to file a notice of objection simply indicating that “the assessed tax owing amount is incorrect” and indicating that once an appeals officer is assigned to the case, I will provide further details.
By not laying out the entire case in the notice of objection you have accomplished two things:
- You have not rushed to prepare an objection in 90 days, possibly missing things, and possibly doing a sloppy job; and
- You have provided yourself with the better part of a year to gather all necessary information in order to build your case.
Generally, I like to take the first 2-3 months after the objection is filed to prepare the case and I leave myself a few extra months in order for clients to obtain hard-to-get documents, such as statements and legal documents from foreign countries.
The goal is that by the time the appeals officer is assigned you have produced a package which is comprehensive and detailed. It should outline your position and provide all supporting documentation in an organized fashion. You need to make it easy for the appeals officer to decide in your favour.
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. In other cases, the appeals officer disagrees with the taxpayer and a “notice of confirmation” is issued. During this entire time, interest continues to accrue on the debt, as the CRA is presumed to be correct until proven otherwise.
Once the notice of confirmation or reassessment is issued by the appeals officer, a taxpayer has 90 days to appeal the decision to the Tax Court of Canada.
It should be noted that for income tax cases, a taxpayer has the right to skip over the appeals officer and appeal directly to the Tax Court of Canada once 90 days have elapsed from the filing of the notice of objection. For GST / HST cases, a taxpayer must wait 180 days from the filing of the objection, and they can then skip directly to the Tax Court of Canada. For taxpayers who want to save time, skipping directly to court is often a good solution. In particular it is helpful for those who are objecting to an HST assessment which is incorrect, and which has to be serviced on an ongoing basis until such time as the reassessment is reversed.
An objection to an assessment or reassessment concerning a non-trust tax debt will result in a “stall code” being applied in the CRA’s computer. This means that if the CRA has already started collections action, it will stop. And if they have not yet initiated collections, they won’t just yet. But remember that while an objection to an income tax debt stops collections activity, this is not the case for an HST debt. So, a terribly incorrect HST assessment will take a year or two to correct, and in the mean while the incorrect debt is fully collectible by the CRA collections department.
It is important to realize that even while a stall code has been applied, and even while a CRA statement of account will show the amount a “disputed item”, and even though the CRA may not be able to take collections action, it is in your best interests to voluntarily service the debt.
There are three primary reasons for this:
- Interest still accrues on a daily basis. Voluntary payments reduce the debt and thus reduce the interest;
- Every payment you make will reduce the debt. It is better to start paying what you can and reduce the debt over the year or two, rather than be faced with a debt at the end of the process which has not been serviced; and
- If there is any amount owing at the end of the objection / court process, and if this amount does go to the collections department, you will be one of the only taxpayers in the collection officer’s inventory who has been paying voluntarily. This will go a long way to building good faith and getting a payment plan.
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