Now that we’ve passed the second personal tax-filing deadline of the year, June 15, which is for individuals with self-employment income, chances are your clients have either received, or will shortly receive, their Notice of Assessment from the Canada Revenue Agency (CRA). You should remind these clients that if they plan to object their tax assessment, perhaps because the CRA disagreed with a business expense claimed or denied an interest expense deduction, they need to pay very close attention to the mailing date printed on the notice of (Re)Assessment.
The deadline for filing an objection is one year from the normal filing due date, or 90 days after the date printed on the Notice, whichever is later. If the deadline is missed, a taxpayer can still apply to the CRA within one year of the deadline for an extension of time. The application must include the reasons the individual didn’t object before the deadline and be addressed to the Chief of Appeals in an Appeals Intake Centre.
In addition, the taxpayer needs to demonstrate that she was unable to object within the time limits or was unable to instruct someone else to act on her behalf, or had a “bona fide intention to object.” The taxpayer must also show that it would be “just and equitable” to extend the deadline and the application was made as soon as circumstances permitted. If the CRA denies the application, the taxpayer may appeal to the Tax Court of Canada (TCC).
The CRA’s “Annual Report to Parliament” tabled in the House of Commons this past February reported that almost 76,000 income and commodity tax disputes were filed in the 2014-15 taxation year. That same year, however, only 3,424 appeals went beyond the objection stage and were appealed to the TCC.
A recent appeal, heard last autumn, involved a taxpayer request to extend the deadline to file notices of objection for the taxpayer’s 2001 through 2009 taxation years. The taxpayer not only failed to file notices of objection for those tax years within 90 days of the dates printed on the notices of assessment, but also neglected to file an application with the CRA for an extension of time to object within a year from the expiration of the original 90-day deadline.
After the CRA denied the taxpayer’s notices of objection as well as his application for an extension of time as both were submitted past the required deadlines, the taxpayer further failed to meet the deadline for filing an application with TCC for an extension of time. In court, the taxpayer’s representative stated that “her client did not understand the meaning and the significance of the notices of assessment.”
Unfortunately, there wasn’t much the TCC judge could do, saying that “the time limits in the [Income Tax] Act are strict and this Court cannot alter them.” The judge then cited a prior decision of the Federal Court of Appeal, which found that “when a taxpayer is unable to meet the deadline prescribed by the Act, even by reason of a failure of the postal system, neither the Minister nor the TCC can come to his help… Hence, if a postal failure cannot save a taxpayer, he will not be saved by his failure to grasp the significance of a notice of assessment served on him.”
So, this summer, if clients approach you and mention they have been reassessed, consider sharing this recent decision with them to ensure they don’t miss their deadline to object.
See also: Getting it right, or fixing it