The Canada Revenue Agency (CRA) regularly issues a Notice of Assessment (NOA) to taxpayers that differs from what the taxpayer had originally reported. This is often due either to a lack of supporting documentation or to a different interpretation of the tax laws. Taxpayers who disagree with the CRA have the right to dispute these decisions, but must do so according to certain rules.
Disputing a CRA Decision
There are many ways to dispute a CRA decision. If you disagree with an assessment, you can begin with an informal inquiry as to what the issue is. If this does not resolve the issue, you can file a formal Notice of Objection, which may either resolve the matter or lead to the ultimate means of disputing a CRA decision: the filing of an appeal to the Tax Court of Canada.
The majority of disputes between taxpayers and the CRA are due to a lack of supporting documentation. At any stage in the dispute resolution process, you should be prepared to submit the documents necessary to back your position, whether you are claiming deductions and credits or establishing your taxable income. The more detailed information in your file, the better your chances of success will be.
If you notice something you disagree with upon receiving a Notice of Assessment or a Notice of Reassessment, the first action is almost always to communicate with the CRA to understand the issue and to begin an informal review process. The CRA encourages this communication, and thus publishes a list of telephone numbers that taxpayers can use depending on the nature of the issue.
If the dispute is over something simple, such as a missing document in your file, and you are able to provide it, there is a good chance that the matter will be resolved at this stage. Otherwise, you will need to file a formal Notice of Objection.
Notice of Objection
A Notice of Objection is the first step in the formal dispute resolution process. It is important to note that the Notice of Objection must be filed within 90 days of receiving the disputed Notice of Assessment or Reassessment. It is difficult to obtain an extension to this deadline unless there are extreme circumstances, such as the taxpayer being hospitalized for a long period of time. For this reason, even if you are still in the initial informal review stage, you should remain aware of the deadline and be sure to file a Notice of Objection on time.
A Notice of Objection should succinctly describe the parameters of the issue as well as indicate your belief as to the correct tax treatment of the element in dispute. The Notice of Objection should be accompanied by all relevant supporting documents. You may also choose to file the form called T400A Objection – Income Tax Act.
Your Notice of Objection can be filed online using the CRA’s My Account platform, by regular mail, or even in person at a local CRA office. Once received, the notice will be redirected to a specialized section of the CRA where your file will be thoroughly reviewed, a process that may take several months. During this period, you will be able to communicate with the CRA agent handling the review in order to provide more details and further documentation, or to reach a settlement.
Appeals to the Tax Court of Canada
If the objection process does not resolve the issue and you wish to pursue the dispute, you will need to take your case before the Tax Court of Canada. Within 90 days of receiving the CRA’s decision on the Notice of Objection, you must file an appeal to the Court.
There are two types of appeals: the Informal Procedure and the General Procedure.
Taxpayers can opt to use the Informal Procedure under the following conditions: the disputed amount of federal tax and penalties is $25,000 or less, the dispute is over a loss amount of less than $50,000, or it is only interests and penalties that are being disputed. Compared with the General Procedure, the elements of the Informal Procedure are greatly simplified and the time between the filing of an appeal and the judgment of the Court is usually shorter.
Informal Procedure cases are heard by the same judges as General Procedure cases, but taxpayers using the former can choose to represent themselves or to be represented by someone else, including an attorney.
The General Procedure is the standard and will often require lengthy court proceedings with many documents being filed. Taxpayers may represent themselves or be represented by an attorney, but may not be represented by anyone else.
Once the Tax Court of Canada has rendered its judgment, you have the right to appeal this decision to the Federal Court of Appeals and, eventually, to the Supreme Court of Canada.