Part of running your own small business means having to file your taxes and interact with the Canada Revenue Agency. Receiving a notice of assessment is a normal part of the process, and the first thing you should do is relax. On the other hand, the last thing you should do is ignore the notice. There are specific steps to be taken and deadlines to meet to preserve your rights. Here is what you need to know.
The Audit and Assessment Process
Canada’s tax system is one of self-assessment, which means you are responsible for the preparation and filing of your business’ tax return, along with the veracity of the information it contains. Upon filing, you are normally sent a first notice of assessment within a few weeks. Normally, this notice closely reflects the return you filed since, at this stage, the CRA only makes a cursory review of the return.
In the lifetime of a business, it is perfectly normal for the CRA to occasionally want to review and verify one or several tax returns. This is known as the audit process and can take the form of a simple written request for documents, or an auditor can visit you to verify certain elements.
Following an audit, if the CRA finds elements in your returns that are erroneous, it may issue a new notice of assessment correcting your returns to what they should have been. If you agree with its decision, say for example, you made a simple calculation error the CRA rectified, you can simply pay the amount requested and the process ends there. However, if you disagree with the CRA’s interpretation, there are ways to challenge its decision.
Challenging a Notice of Assessment
The first step when challenging a notice of assessment is to file a notice of objection. This is an administrative process, and the form used is quite simple. However, make sure to include a detailed explanation of why you feel the notice of assessment is incorrect and what changes should be made. The notice of objection is filed with a different branch of the CRA, and the file is reviewed entirely by a new auditor, who is known as an appeals officer.
You only have 90 days from the receipt of the notice of assessment to file your notice of objection. If you are still gathering evidence on the 90th day, file the objection anyway to protect your rights; you can always add additional documents along the way. Normally, the process takes about a year and involves several interactions with the appeals officer. Once the appeals officer reviews the file, he renders a decision. If you disagree with the decision, then the actual judicial process begins, and you can file an appeal before the Tax Court of Canada.