Taxpayers start getting tax refunds from the Canada Revenue Agency in April and May. That may be a cause for celebration. But if you get a Notices of Re-assessment, it can contain a nasty surprise, complete with demands for more tax payments along with penalties and interest to boot. But if you think you’re in the right, there is a way to appeal that Notice.
Your first step is to look closely at the Notice of Assessment and determine exactly why the CRA says you owe more. Did you miscalculate an entry? Did you make a data entry error when you filed your return? Sometimes the problem is as simple as that, and you’ll just have to swallow your embarrassment and pay up. Other times, the CRA may be disallowing tax credits or deductions. If you’re not sure what the problem is, call the CRA to find out. Make sure you have your tax return, the Notice of Assessment, and any other supporting documents handy. Sometimes, the problem can be cleared up by speaking with someone directly.
If calling the CRA doesn’t resolve things, you may still have a good reason to object to the CRA’s assessment. And, as you’d expect, they have a form for that. It’s called the “T400A Objection – Income Tax Act,” or more commonly, a Notice of Objection.
If you plan to file the T400A, it’s crucially important to remember that you have only 90 days from the date the CRA mailed the Notice of Assessment to file a Notice of Objection, whether you actually received your Assessment or not. Your Notice of Objection should include chapter and verse about why you believe the CRA’s Assessment is incorrect. That includes evidence that the CRA has made an error either in fact or in law. And yes, if this sounds as if you are considered “guilty” until you can prove your innocence, you’re right.
The CRA is considered to be in the right until proven wrong. And that means that you still must pay any assessed amounts or face interest on overdue amounts. If you have a balance owing for 2017, the CRA charges interest, compounded daily, starting May 1, 2018, on any unpaid amounts owing for 2017. In addition, CRA charges interest on the penalties starting the day after your filing due date. The rate of interest can change every three months, depending on the CRA’s prescribed quarterly rate. For the second quarter of 2018, it’s 6%.
In general, it makes sense to pay what the CRA says you owe, if only to avoid that penalty interest from mounting up. If your Notice of Objection deals with tax deductions, GST/HST, or withholding tax, the CRA can continue to take steps to collect any balance owing, including seizing assets or garnisheeing wages. If you pay now and then continue to fight the assessment, which could take as long as a year to sort out, and subsequently win, you’ll get your money back, with a little bit of interest.
Filing a Notice of Objection can be complicated, with plenty of deadlines and conditions attached. Doing it wrong can end up costing you not only your original assessment but also other penalties and interest. If your situation is complex, your best bet is to get advice from a tax lawyer or other qualified financial or tax advisor to help you with the procedures involved in objecting to an assessment.
Courtesy Fundata Canada Inc. © 2018. Robyn Thompson, CFP, CIM, FCSI, is president of Castlemark Wealth Management. This article is not intended as personalized advice. Securities mentioned are not guaranteed and carry risk of loss. No promise of performance is made or implied.