Tax Chat and Other Matters - Objections & Appeals



Posted: Thursday, August 13, 2009

by Michel Chevalier
TaxAction

Taxes are complicated; taxes are boring; people feel they can't do anything to change the system or to fight the system; people do little or no tax planning; people do their bookkeeping and tax returns at the last minute which makes for a greater chance mistakes will get made; few people take the time to learn how to prepare their own tax returns; many people are intimidated by the CRA (Canada Revenue Agency)and so on.

All negative stuff! And here I am wanting to write about it and help people with it. I must be crazy I sometimes think. Believe it or not however this is meat and potatoes to me at this time in my working life. I will try to make it as interesting as I can but there will be times when the knowledge and information I feel it important to share will make for dry' reading. For some of you this could well be one of those times. I will try and make it up to you with the next columnI will share a case history which hopefully will warm some of this up.

I am going to outline the basic steps of the process that is available to all taxpayers if they disagree with CRAor if CRA disagrees with them. In order to keep it simple and understandable this is the basic process because depending on decisions and outcomes along the way there are sometimes different routes to take.

Why am I outlining this in a column? Good question! The answer is F.E.A.R aka False Evidence Appearing Real or Future Events Appearing Real. We are all born with a couple of good fearsfear of falling and fear of painthese help keep us from hurting ourselves. Just about all other fear is manufactured in our minds and we allow it to take hold because of the great unknowns in our livesin this case the great unknown CRA and tax system.

My thinking is that by sharing the system and process and then in future columns sharing some actual stories/cases that followed the steps of the process with success that I will be able to help you remove the fear and intimidation factor from taxes so that you do what you can to legally reduce the amount of tax you pay and then if you are questioned by CRA you know that there is a process which you can follow to stand up for what you feel is right.

These are the steps that a taxpayer might take in order to object to a CRA assessment:

  1. Taxpayer submits tax return with expected refund of $4,300
  2. Taxpayer receives CRA Notice of Assessment; CRA either agrees with tax return as filed or disagrees and states that refund should only be $1,800
  3. Tax payer has 90 days to write and send in a Notice of Objection to the CRA Appeals Division explaining why the original refund amount of $4,300 is valid; it is usually appropriate to submit supporting documentation with the Objection
  4. CRA will eventually respond; if they agree with you, case closed; if they disagree and you feel you have a good case with supporting documentation (receipts) and the expenses are real business expenses then the taxpayer has the option to file a Notice of Appeal to The Tax Court of Canada; this would take the form of a letter outlining the situation and again providing supporting documentation.
  5. At this stage, particularly if you have a strong case, CRA may opt not to go to Court and you have won; CRA may also suggest negotiating which is sometimes a good option; if you do end up in Tax Court and the amount of tax owing is $12,000 or less you can opt for Informal Tax Court' where you don't need a lawyer; for amounts greater, then you would need the help of a lawyer.
  6. If you really don't feel you have been treated fairly there is now an Ombudsman in place to provide help and assistance.
This is a simplified version of the process to give you an idea that you can take action and often successfully on your own and it doesn't have to be costly. You need to be aware that CRA does make a lot of mistakes. Some are honest mistakes but many really strike me as being deliberately misleading so it is a good idea not to take what CRA says at face valueand always deal with CRA in writingnever ever count on a phone call agreementalways back it up in writing.

Remember what I said in my last column'it is better to fight' because if you become someone who challenges and doesn't simply do whatever CRA tells you to do they will tend to head for the person from whom they can extract money more easily.

I am happy to answer questions and if I get enough queries on the same matter then I will provide the answer in a subsequent column.

Always rememberFEAR NOT!

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