Q – I recently received a Notice of Assessment from the Canada Revenue Agency, saying that I owe several thousand dollars more in taxes. I disagree. But I’m at a loss about what to do next. Should I call the CRA directly? What would be the best course of action? – Stephen B., North York, Ontario
A – It’s around this time of year that taxpayers get tax refunds and Notices of Assessment from the CRA. Sometimes those Notices of Assessment can contain a nasty surprise, as in your case.
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, your next step is to call the CRA to find out. Sometimes, it can be cleared up by speaking with someone directly.
If calling the CRA doesn’t resolve things, you may have a good reason to object to the CRA’s Assessment. And, as you’d expect, there’s a form for that. It’s called the T400A Objection – Income Tax Act, or more commonly, a Notice of Objection.
If you plan to go down this route, it’s really important to note that you have only 90 days from the date the CRA mailed you your 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 any you still must pay any assessed amounts or face interest on overdue amounts (at an annual 5% rate for the second quarter of 2013, which compounds daily).
In general, it makes sense to pay what the CRA says you owe, if only to avoid that penalty interest from mounting up. The reason is simple. 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 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 a perilous enterprise, with various time limits and conditions attached. Doing it wrong can end up costing you not only your original assessment but also other hefty penalties and interest. Your best course of action is seek the advice of a tax lawyer or other qualified financial or tax advisor to help you with the procedures involved for filing a Notice of Objection. – Robyn