The idea of objecting to CRA’s Tax Assessment based on the return that you filed yourself sounds strange doesn’t it? You provided the information, so then why would you have a reason to object to the return?
When you file your return, CRA may have some other information on their file that leads them to believe you had more income or perhaps they determine that you were not entitled to some expenses or credits that you claimed. This causes CRA to assess you for more tax owing than what you filed. Often CRA assesses your return based simply on what you file, but they may revisit your return later and re-assess you. Such an increased assessment can lead to penalties and interest, which can be significant. In the event that CRA determines you are a repeat offender and negligent in some way they can assess gross negligence penalties of up to 50% of the tax debt you owe!
If you are filing a return late you will be assessed penalties based on how many times you have filed late in previous years. For example, if you filed ONLY your 2012 tax return late, you will be assessed a penalty for late filing equal to 5% of the amount of the tax and then 1% per month thereafter, for up to 12 months. Now, say you filed your 2009, 2010 and 2011 tax returns late as well, the penalty would then be increased to 10% of the amount of the tax debt and then 2% per month for up to 20 months. CRA is unforgiving when it comes to these penalties, even if you have a legitimate reason for filing your returns late.
Returns filed late are often subject to more scrutiny by CRA.
While CRA’s website indicates that you can apply to have penalties cancelled through a Taxpayer Relief application, it can be more effective to leverage a Notice of Objection to object to penalties or the increased tax itself as assessed on your return. Choosing the Notice of Objection route does not block you from Taxpayer Relief.
Filing an Objection is very time sensitive. An Objection must be filed within 90 days of the re-assessment. If you have a good explanation that will meet CRA’s high standards, you may be able to extend this time frame for up to an additional year. When you file an Objection, if CRA rejects it you then have three choices:
- Go to tax court and ask a judge to make a final determination
- Make an application for Taxpayer Relief
- Pay the taxes plus interest plus penalties – even if they are unfair
Going to court is the most costly of the three options. Nothing that CRA puts onto the re-assessment is necessarily the final answer or correct and you have a great deal to gain by fighting their arbitrary assessments of penalties and interpretation of what is income, what may be deducted legitimately and what credits you are allowed to claim. With that said, the Objection and Taxpayer Relief programs are both official programs with bureaucratic processes. You will be best served working through a professional to make applications under these programs so as to optimize your chance of being successful. This will also ensure that throughout the process you don’t give CRA any further information that could lead to more problems for you later in the event that your applications are rejected and they commence collection action against you.
For more information about filing an Objection or a Taxpayer Relief application please visit www.taxsolutionscanada.com or call 1-888-868-1400.