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YES, YOU CAN FIGHT THE CRA – AND SOMETIMES EVEN WIN!
11/21/2018 5:18:34 AM
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Fund Library Q&A
Your questions about financial planning, investments, and portfolio management answered by an industry expert



By Robyn K. Thompson  | Friday, June 29, 2018




Q – I recently received a Notice of Re-Assessment from the Canada Revenue Agency. They say I made some sort of error in calculation, and are now asking for several hundred dollars more in tax, with a threat of interest and penalties if I don’t pay up by the deadline. I think they’re wrong. Is there any way to fight this? – Jordan N., Scarborough, Ontario

A – Your first step is to look closely at the Notice of Assessment and determine exactly why the Canada Revenue Agency (CRA) says you owe more. Did you really miscalculate an entry? Did you make a data entry error when you filed your return? Double-check your figures. 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, call the CRA to find out. Make sure you have your tax return, the Notice of Assessment, and any other supporting documents handy. Sometimes, the problem can be cleared up by speaking with someone directly.

If calling the CRA doesn’t resolve things, you may still have a good reason to object to the CRA’s assessment. And, as you’d expect, they have a form for that. It’s called the “ T400A Objection – Income Tax Act,” or more commonly, a Notice of Objection.

If you plan to file the T400A, it’s crucially important to remember that you have only 90 days from the date the CRA mailed the 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 you still must pay any assessed amounts or face interest on overdue amounts. If you have a balance owing for 2017, the CRA charges interest, compounded daily, starting May 1, 2018, on any unpaid amounts owing for 2017. In addition, CRA charges interest on the penalties starting the day after your filing due date. The rate of interest can change every three months, depending on the CRA’s prescribed quarterly rate. For the second quarter of 2018, it’s 6%.

In general, it makes sense to pay what the CRA says you owe, if only to avoid that penalty interest from mounting up. 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 then continue to 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 complicated, with plenty of deadlines and conditions attached. Doing it wrong can end up costing you not only your original assessment but also other penalties and interest. If your situation is complex, your best bet is to get advice from a tax lawyer or other qualified financial or tax advisor to help you with the procedures involved in objecting to an assessment.

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. She is also listed as a MoneySense Approved Financial Advisor. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

© 2018 by the Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.

 
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