Once your accountant completes and files your income taxes (because really, there’s no need for taxes to be a do-it-yourself kind of job), CRA will send you a notice of assessment. It will either confirm that your return was assessed as filed or will identify adjustments made by the CRA.
If your business is one of the lucky ones to have been re-assessed, what should you do now? (Because of course, such re-assessments rarely favour the taxpayer.)
First we’ll tell you what not to do —don’t glance at the letter and put in a drawer to deal with later. Just like if your business receives an audit notice, call your accountant right away. Discrepancies between income tax returns and CRA tax assessments are not uncommon and sometimes your accountant making a call to the tax centre can easily resolve the issue.
If the problem can’t be easily resolved, and if you still believe that you have been wrongly assessed, it’s time to file a Notice of Objection. Typically the basis for such an appeal are a disagreement with the CRA assessment of the taxes owed or a dispute over how the CRA has interpreted the income tax law on your return. For example, your CRA assessment disallows what you believe to be eligible business expense deductions.
Your Notice of Objection must be filed within 90 days of the date printed on the Notice of Assessment. Again, don’t wait until the last minute to call your accountant. It takes time to prepare the relevant documents and facts and complete the necessary forms to explain why you disagree with the assessment.
Once the objection is filed, it’s no longer necessary to pay CRA the amount owing as a result of the reassessment; that fee can wait for the outcome of the objection. But be aware that interest will continue to accrue in the meantime.
After reviewing the facts and documents, a CRA official will make a decision. Should your objection be successful, your tax amount will be adjusted accordingly. However, should your objection fail, you’ll owe the initial amount plus the additional interest. (You do have the option at this point of taking your case to tax court, but be aware that that route involves costly lawyers and other fees.)
It’s important to note that this same process also applies to HST assessments should you feel that your business has been unjustly re-assessed.
Filing an objection is your right as a Canadian taxpayer, but know that the process takes time to wind its way through CRA. A low complexity objection takes approximately three to four months to be reviewed. A mid-level complexity objection can take more than one year.