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What to do when the taxman wants more

by | Jul 15, 2015 | SELF-PUBLISHED

Yes, you can object to a CRA reassessment

If you have received a Notice of Reassessment for your 2014 return from the Canada Revenue Agency demanding more tax or asking you to start quarterly instalment payments, you may have double trouble with the CRA. Here’s what to do before you pop that cheque in the mail.

First things first: Don’t panic! The CRA isn’t always automatically right. Take a deep breath, let heart rate get back to normal, and then look closely at the Notice of Assessment. Why do they say you owe more? Did you miscalculate? Did you suffer from fat-finger syndrome and make a data entry error when you filed your return? Sometimes the problem is as simple as that. If you added an extra “zero” somewhere, it’s relatively easy to file an amended return. If, however, you inadvertently dropped a “zero” somewhere, you’ll just have to swallow your embarrassment and pay up.

Sometimes, the CRA may be disallowing a credit or deduction. If you’re not sure what the problem is, call the CRA to find out. If you’re lucky, you may be able to speak with someone directly. If you’re like most people, though, you’ll never get through to speak with a real person. Sending a letter (yes, a paper letter in an envelope with sufficient postage) to your district tax office might get some action if your problem is a simple one. If not, you might have to go the next step – filing form T400A Objection-Income Tax Act, or more commonly, a Notice of Objection.

Filing a Notice of Objection

If you plan to file a Notice of Objection, you have 90 days from the date the CRA mailed you your Notice of Assessment, whether you actually received your Assessment or not. Your Notice of Objection should include a detailed account about why you believe the CRA’s Assessment is wrong, including evidence that the CRA has made an error either in fact or in law. This is important, because the CRA is considered to be in the right until proven wrong, flipping the principle of presumption of innocence on its head. That also means that regardless of whether you’ve filed an objection, you still have to pay any assessed amounts or face interest (compounded daily) on overdue amounts. If you win, you’ll get your money back, possibly with a tiny bit of interest.

Filing a Notice of Objection can be a tricky business, so it’s best to seek the advice of a tax lawyer or other qualified financial or tax advisor to help you out.

Instalment payments

If the CRA determines that the annual amount of income tax you owe, less any withholding, for the current year and either of the two previous years is more than $3,000, it will demand tax payments in instalments, payable quarterly.

Unlike quarterly instalment payments for GST/HST, which are mandatory whether or not you receive a notice or voucher, you don’t have to pay income tax instalments until you receive a “reminder notice” from the CRA. These typically arrive twice a year – one in February reminding you to pay up on March 15 and June 15, and one in August, for payments due September 15 and December 15. The CRA must receive these payments by the due dates so that you will be deemed to have paid on time.

If you are absolutely sure your tax liability for 2015 will not exceed the $3,000 threshold, you can ignore the instalment reminder notices. If you’re not sure or you think you’re borderline, it makes sense to go ahead and pay the instalments to avoid steep penalties and interest charges.

Instalment payments can get complicated. Again, to avoid running afoul of CRA and incurring penalties, it makes sense to consult a qualified financial advisor if you’re unsure about your tax situation. But make sure you do so well before any instalment due dates.

© 2015 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited. This article is for information only and is not intended as personal investment or financial advice.

© 2023 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited. This article is for information only and is not intended as personal investment or financial advice.

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