Following an audit by the Canada Revenue Agency (CRA), you may receive a notice of assessment that you dispute. If you want to challenge the auditor’s findings, your first step is to file a Notice of Objection. Here is what you need to know to give yourself the best chance at a successful outcome.
Eligibility to File Tax Objection
You can only submit an income tax objection if you’ve received certain notifications from the government. If you haven’t, you’re not eligible to make any objections regarding how much income tax you owe.
You must have received a Notice of Assessment, Notice of Reassessment, Notice of Determination, or Notice of Redetermination. If you got a Statement of Account or proposal letter from an auditor, you can’t file an objection.
When Should You File a Notice of Objection?
You only have 90 days after the date of the notice of assessment to file your Notice of Objection. After this time your rights are lost, and it’s very difficult to get an extension. Practically speaking, if you need extra time, it’s best to file an incomplete objection on the 90th day than to wait until you have all the documentation ready. You can always file additional documents during the objection process.
CRA Actions After an Objection Filing
Once you file your objection, it’s analyzed by a CRA appeals officer who is independent of the auditor who issued the notice of assessment. The appeals officer reviews the auditor’s file as well as your arguments, and you’re able to speak with them and explain your point of view. Once the appeals officer considers all of the elements of the file, they render a decision. If you still disagree with the decision, the next step is to file an appeal with the Tax Court of Canada.
How to Use Form T400
The CRA publishes Form T400A – Notice of Objection, which you can use to file your Notice of Objection. It’s not mandatory, but it can help simplify the process because you ensure that you include all the necessary information to create a valid objection.
It’s important to indicate your full coordinates on this form, along with specific information found on the notice of assessment you’re challenging.
The form lets you state the relevant facts and reasons for your objection. If you need more space than is available on the form, you can note on the form that you’ve attached your motives as a schedule. Then you can prepare a detailed explanation of the reasons for your objection along with additional documents to prove your point.
For example, if the auditor refuses the deduction of an expense and you have a copy of the invoice from your supplier along with proof of payment, you can submit those documents with your objection.
If you have elements that prove your point, submitting them as schedules to your Notice of Objection can help support your case and may improve your chances for success. If you have asked for documents but do not yet have them, such as bank statements, you can make note of that information in your motives and submit those documents when you receive them.
Make Sure to File in Time
You have a certain amount of time to file an objection. If you’re filing on behalf of an individual client, you have until whichever date is later: one year after the tax return filing deadline or 90 days after a notification has been sent to your client. The deadline for your business clients is limited to within 90 days after the notification has been sent.
If you miss the deadline to file an objection, you’ve got options. You can file for an extension if you tried to contact the CRA office or if circumstances beyond your control prevented a timely filing. You have to write to the Chief of Appeals to explain why you failed to comply with the timeline. You can file for an extension within one year of the expiration date.
Choosing Adjustment Over Objection
Don’t adjust your return until you receive a notice of assessment. If you agree with the assessment, the easiest way to make an adjustment is by using the My Account portal online. You can’t change your return if it has not been assessed or it relates to carryback amounts, or if you’re not a resident of Canada.
You can also complete Form T1-ADJ along with a signed letter to outline what you’re changing. Make sure to send in any supporting documents you have for the change. Adjusting online is usually wrapped up within two weeks, while corrections made via mail take up to eight weeks.
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