Disagree with the CRA? Your appeal must be filed on time: Tax Court


Jamie Golombek: For these taxpayers, skipping step of filing objections to CRA proved fatal to their Tax Court cases

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If you disagree with how the Canada Revenue Agency has assessed your tax return, you have the proverbial right to your day in court. But in order to get to the courthouse steps (or, in some cases, its virtual alternative), you need to follow the proper procedures, one of which includes filing a valid and timely notice of objection.

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Filing an objection can be done online by logging into the CRA’s My Account for Individuals, and selecting “Register my formal dispute” (notice of objection). You will automatically receive a case number that you’ll need to include when submitting documents, which can also be done online.

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Alternatively, you can file your objection by mail by printing, completing and sending Form T400A, Objection – Income Tax Act to the chief of appeals at your Appeals Intake Centre. If you don’t want to use the T400A, you simply mail the CRA a signed letter clearly outlining the facts and reasons for your objection.

The deadline for filing an objection is one year from the normal filing due date, or 90 days after the date printed on your notice of assessment (NOA), whichever is later. If you miss the deadline, you can apply to the CRA within one year of the deadline for an extension. If the CRA denies your application, you may appeal to the Tax Court of Canada.

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Failing to file a notice of objection, or filing one late, can be problematic, as illustrated by two recent Tax Court decisions in October 2022. The first case involved a taxpayer who appealed to the court because he disagreed with his notice of assessments for the 2011, 2012 and 2013 taxation years. The issue concerned the withholding tax he paid on withdrawals from his registered retirement savings plan.

But before the case could be heard on its merits, the CRA brought a preliminary motion before the court for an order requesting the appeal be quashed on the basis that the taxpayer did not file a notice of objection against the assessments, as required by the Income Tax Act.

The CRA had assessed the taxpayer’s 2011, 2012, and 2013 tax returns on March 13, 2020, which means the taxpayer had 90 days to object, or until June 11, 2020. No objections were filed. The one-year extension would bring the late-filing objection deadline to June 11, 2021, yet no objections were filed by this date.

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The CRA supported its position by filing an affidavit from a CRA litigation officer who examined the records relating to the taxpayer’s appeal and found no record of any notice of objection ever being received.

The taxpayer, who was characterized by the judge as “honest and transparent,” admitted not having served a notice of objection with the CRA. He skipped that step and filed a notice of appeal to the Tax Court of Canada.

Unfortunately, skipping the objection step was “fatal,” according to the judge. “If he had known at the time, he would have complied with the applicable rules of the Income Tax Act and served a valid notice of objection. But unfortunately, he did not. Ignorance of the law is of no assistance in this case.”

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Since no valid notice of objection was served, the judge ordered the taxpayer’s appeal be quashed, and the taxpayer never did get his chance to argue the substantive merits of his case before the court.

The second case involved a couple sent concurrent NOAs dated May 2, 2017, related to section 160 assessments concerning title transfers of a property between them and their son. Section 160, also known as the “joint liability rule,” gives the CRA the power to hold an individual liable for the tax debts of someone with whom they have a non-arm’s length relationship if they’ve been involved in a transaction seen to avoid tax.

The couple was “perplexed and incredulous when they received the NOAs” showing tax owing of $110,000, and felt that the NOAs were “insufficiently detailed to afford a notice of objection to be filed.”

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At a meeting with a CRA officer in October 2017, the couple clearly disagreed with the assessments and requested additional information, yet the officer did not advise the couple of the need to file an objection in writing or, because the objection deadline had passed, the need to apply to the CRA to extend the time to object.

Neither the officer nor anyone else from the CRA contacted or wrote to the couple after the October 2017 meeting with additional information until collection proceedings were commenced against the couple in early 2018.

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There was no doubt that the couple disputed or, at least, wished to formally dispute the section 160 assessments, but the sole issue before the Tax Court was whether they sufficiently conveyed that to the CRA within the appropriate time frame.

The taxpayers’ main argument was that the NOAs were not clear on what needed to be done. Yet the judge pointed to the “clear, succinct language … starkly present in the NOAs” that states: “You have the right to object to this assessment by filing, with the Minister of National Revenue, a formal Notice of Objection WITHIN 90 days of the date this Notice of Assessment was mailed to you. Notice of Objection forms may be obtained by contacting the Appeals Division of your local Tax Services Office.”

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Since the couple didn’t file any objections and missed the deadlines, they could not fight their section 160 assessments in court.

“Taxpayers need to focus on the simple step of filing the one page document comprising an objection within 90-days of the NOA,” the judge concluded. “This court frequently contorts itself to find any written material filed on or before these ‘deadlines’ sufficient. However, it cannot transform the thin air of discussion into a written filing.”

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com

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