Of the 27 million individual income tax returns already filed with the Canada Revenue Agency for the 2021 tax year, no two were identical. Each return contained its own particular combination of types and amounts of income reported and deductions and credits claimed. There is, however, one thing which every one of those returns has in common. For each and every one, the CRA will review the return filed, determine whether it is in agreement with the information contained therein, and, finally, issue a Notice of Assessment (NOA) to the taxpayer summarizing the Agency’s conclusions with respect to the taxpayer’s tax situation for the 2021 tax year.
When all goes as it should, the information contained in the Notice of Assessment is the same as that provided by the taxpayer in his or her return. In a minority of cases, however, the information presented in the NOA will differ from that provided by the taxpayer in his or her return. Where that difference means an unanticipated refund, or a refund larger than the one expected, it’s a good day for the taxpayer. In some cases, however, the NOA will inform the taxpayer that additional amounts are owed to the CRA. When that happens, the taxpayer has to figure out why, and to decide whether or not to dispute the CRA’s conclusions.
Many such discrepancies are the result of an error made by the taxpayer in completing the return. A lot of information from a variety of sources is reported on even the most straightforward of returns and it’s easy to overlook some of that information. Especially where the taxpayer has multiple sources of income – for instance, individuals who are working in the gig economy and may work under a succession of contracts during the year, or have multiple sources of income at any given time, it’s easy to overlook one or more small amounts of income. Equally, newly retired individuals who are used to having only one source of income – their paycheques – may now be receiving Canada Pension Plan benefits, Old Age Security amounts, pension income, and, possibly, withdrawals from a registered retirement savings plan or registered retirement income fund, making it difficult to keep track of everything.
Most Canadian taxpayers now use tax return preparation software to complete and file their returns. While such software essentially eliminates the risk of arithmetical error, the process isn’t foolproof. Such tax software relies, in the first instance, on information input by the user. No matter how good the software, it can’t account for income information which the taxpayer hasn’t provided. In other cases, the taxpayer can easily transpose figures when entering them, such that an income amount of $39,257 on the T4 becomes $32,957 on the tax return. Once again, the tax software has no way of knowing that the information input was incorrect, and calculates tax owing on the basis of the figures provided.
Where there is additional tax owing because of an error or omission made by the taxpayer in completing the return, and the CRA’s figures are correct, disputing the assessment doesn’t really make sense. There is as well a tax myth which has been around almost as long as our current income tax system and which says that if a taxpayer doesn’t receive an information slip (T4 or T5, as the case might be) for income received during the year, that income doesn’t have to be reported and therefore isn’t taxable. That is not the case, and never has been. All taxpayers are responsible for reporting all income received and paying tax on that income, and the fact that an information slip was lost, mislaid, or never received doesn’t change anything. The CRA receives a copy of all information slips issued to Canadian taxpayers, and its systems will cross-check to ensure that all income is accurately reported.
There are, however, instances in which the CRA and the taxpayer are in disagreement over substantive issues, and those issues most often involve claims for deductions or credits. For instance, the CRA may have disallowed an individual’s claim for a medical expense, or for a deduction claimed for a business expenditure, and the taxpayer believes in good faith that the credit or deduction claim is legitimate.
Whatever the nature of the dispute, the first step is always to contact the CRA for an explanation of the reasons why the change was made. While the information provided in the NOA is a good summary of the taxpayer’s tax situation for the year, it may not always be clear on precisely how and why the taxpayer and the Agency disagree on the actual amount of income tax which the taxpayer must pay for the year. The first step to be taken would be a call to the Individual Income Tax Enquiries line at 1 – 800-959‑8281, where agents who have access to the taxpayer’s return can explain any changes which were made during the assessment process. If that call doesn’t resolve the taxpayer’s questions, or there is still a disagreement, the taxpayer has to decide whether to take the next step of filing an objection to the NOA.
Doing so formally advises the CRA that the taxpayer is disputing his or her tax liability for the taxation year in question. Not incidentally, the filing of an objection also brings to a halt most efforts undertaken by the CRA to collect taxes which it considers owing for the taxation year under dispute (although, if the taxpayer is eventually found to owe the amount in dispute, interest will have accumulated in the interim). Where the taxpayer files an objection, the CRA’s collection efforts are, in most cases, suspended until 90 days after the date the CRA’s decision on that objection is sent to the taxpayer.
There is a time limit by which any objection must be filed, albeit a reasonably generous one. Individual taxpayers must file an objection by the later of 90 days from the mailing date of the Notice of Assessment (the date found at the top of page 1) or one year from the due date of the return which is being disputed. So, for tax returns for the 2021 tax year, the one-year deadline (which is usually, but not always, the later of those two dates) would be April 30, 2023 (or June 15, 2023 for self-employed taxpayers and their spouses). As with most things related to taxes, it’s best not to put it off. At the very least, if the taxpayer is ultimately found to owe some or all of the taxes assessed by the CRA, interest will have accrued on those taxes for the entire period since the filing due date and, if the filing of the objection is delayed, the CRA may well have already commenced its collection efforts. Certainly, if the deadline is imminent, it’s necessary to file a Notice of Objection in order to preserve the taxpayer’s appeal rights, even if discussions with the CRA are still ongoing.
Taxpayers who have registered with the CRA’s online services feature My Account can file their Notice of Objection online at https://www.canada.ca/en/revenue-agency/services/e‑services/e‑services-individuals/account-individuals.html. The taxpayer provides information with respect to the assessment being disputed and the reasons why the assessment is being disputed and submits those reasons by clicking on the Submit button at the bottom of the “Register my formal dispute – review” page. Taxpayers who are disputing their tax assessment can also scan and send supporting documents relating to that dispute to the Agency.
While filing a dispute through My Account is certainly faster than mailing hard copy of the Notice of Objection, not all taxpayers want to use that option. In particular, those who are not already registered with My Account may not wish to undertake the registration process simply in order to file a single Notice of Objection. Taxpayers who choose instead to file their objection using hard copy of a Notice of Objection form can find the most current version of the CRA’s standardized T400A Objection (which was updated and re-issued in December 2021) on the Agency’s website at https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t400a/t400a-22e.pdf.
Taxpayers aren’t obligated to use the CRA’s official Notice of Objection form – any communication which makes it clear that the taxpayer is objecting to his or her Notice of Assessment will do. Nonetheless, there’s no reason not to use the standardized form, and there are benefits to doing so. Using the T400A form will make it clear to the CRA that a formal objection is being filed, will present the necessary information in a format with which the Agency is familiar, and will also mean that no required information is inadvertently omitted. It’s also helpful to include a copy of the Notice of Assessment which is being disputed. Taxpayers should also consider ensuring proof of both delivery and time of delivery by sending the form or letter to the Appeals Intake Center in a way which provides for tracking and proof of delivery.
There is a single Appeals Intake Centre, and the mailing address for that Centre can be found on the CRA’s Notice of Objection form. It’s also possible to contact the CRA at its objection enquires phone line in order to get information about the status of one’s appeal. The toll-free telephone number for calls from within Canada to that line is 1 – 800-959‑5513.
In the course of making its decision, the Agency may or may not contact the taxpayer for further discussions of the issues in dispute. Should the taxpayer be contacted, he or she may be asked to provide representations outlining his or her position, in writing or at a meeting. Through such representations and meetings, it may be possible for the taxpayer and the CRA to come to an agreement on the taxpayer’s tax liability. In either case, the CRA will either confirm its original assessment or change it. If the original assessment is changed, the CRA will issue a Notice of Reassessment outlining the changes. If the taxpayer continues to disagree with the CRA’s position, the next step is an appeal to the Tax Court of Canada, which must be filed within 90 days after the CRA issues its assessment or reassessment. While in many instances (generally where amounts in dispute are relatively small) taxpayers are allowed by law to represent themselves before the Tax Court, it’s generally a good idea, once things reach this point, to consult a tax lawyer before taking that next step.
The CRA also publishes a useful pamphlet entitled Resolving Your Dispute: Objection and Appeal Rights under the Income Tax Act, and the most recent release of that publication can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p148/p148-resolving-your-dispute-objection-appeal-rights-under-income-tax-act.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.