How to File a Notice of Objection
From Taxpayers Advocate
A Notice of Objection is the first step in the formal procedure to resolve a dispute with the Canada Revenue Agency (CRA). You should send an Objection if you have received a Notice of Assessment or Reassessment or a Determination that you disagree with. This simplified guide aims to give you some general information about the process of filing a Notice of Objection and is mainly aimed at individuals so please be aware there can be additional rules for corporations and certain provinces.
Tax is a special area of law in that when you receive a Notice of Assessment or Notice of Reassessment or other determination from the CRA, it is presumed to be correct. You are basically presumed to be “guilty” of owing the taxes as calculated on your assessment and you have to prove you are “innocent” if you think you should pay less tax. If you do not do anything to challenge an assessment, you will have to pay the amount owing and the CRA will do everything in their power to collect from you. To compensate for the Burden of Proof on taxpayers, the CRA have an internal appeals division that gives taxpayers the opportunity to have a fair and impartial review without the expense and complication of going to Court. Filing an Objection is free and relatively simple. There are different procedures to follow depending on what kind of assessment or decision you are objecting to and you should pay close attention to the strict time deadlines to avoid having to pay taxes that you shouldn’t actually owe.
You will see in this guide that the words used to describe the dispute process within the CRA often refer to “appeals” when talking about Objections. Appeal is technically the term for when you appeal to Tax Court and an Objection describes the internal CRA process but the CRA department that handles Objections is known as the appeals division. If you are looking for information on appealing to Tax Court after your file an Objection, you should read our separate guide for this topic.
|QUICK SUMMARY: If you disagree with the changes to your tax account, you should:
If you don’t challenge an assessment, you will have to pay the additional taxes owing.
In some cases, you can ask the CRA to informally adjust your assessment and have a dispute resolved without filing a Notice of Objection. For example, if all the CRA need is a copy of a birth certificate for your child or some kind of simple document, you may just be able to send this to an agent and they will issue another reassessment. This can be very beneficial as the appeals division within the CRA is slow and backlogged so it can take anywhere between 6 months and several years to have your Objection resolved. To give you an idea of just how busy the appeals department of the CRA actually is, the CRA’s Annual Report to Parliament for 2009-2010 shows 117,742 new Objections were filed with 159,569 already in the CRA inventory and only 67,441 Objections were actually being resolved in the one year period. As you can imagine, this makes the whole appeals process slow and rather frustrating for taxpayers. If you are able to speak to someone and have your assessment changed immediately without an Objection, you can avoid this delay and the headaches that come with it.
As a word of caution, there are very strict deadlines for filing Objections so even if someone at the CRA has said they will make the adjustment for you, if you haven’t seen a reassessment by the time the deadline approaches, you should still file an Objection explaining the situation. This should be done even if you have a promise from a CRA agent that a reassessment is on the way as legally, the word of one agent does not bind the whole CRA and you could be left without a way to appeal your assessment. Even if you just file a Basic Notice of Objection, you just need something to show that you disagree with the assessment and are disputing it.
For most people, the deadline to file a Notice of Objection is 90 days after the date of your Notice of Assessment (see sections 165 of the Income Tax Act and 301 of the Excise Tax Act). The date should be taken from what is printed on the assessment and not when you receive it. You need to take this deadline very seriously as it can be applied strictly by the CRA. If you miss the initial deadline for filing your Objection, the legislation allows you to ask the CRA if they will consider granting an extension to allow you to object, known as an Application for an Extension of Time. However, it is at the CRA’s discretion as to whether to allow you to do this so it is always better to file within the original 90 days. To apply for extension beyond the 90 days, you have to demonstrate the following:
- You must apply within one year of the original deadline;
- You must show that you were either unable to file an Objection (either yourself or by using a representative) or that you had an honest intention to dispute the assessment;
- You need to explain why, given the circumstances in your case, it would be Just and Equitable to allow the extension; and
- You must show that the application was made as soon as circumstances permitted it to be made.
There is no set format for an Application for an Extension of Time but it must be sent with a copy of your Notice of Objection. If your application is granted, the CRA will accept your Objection for filing as of the day they grant the extension and process your Objection in the normal fashion. The Application for an Extension of Time can be a simple covering letter that goes with your Objection such as in this example.
If the CRA are not satisfied that you meet the criteria, they will refuse your application. You can Appeal to Tax Court to ask them to allow your extension but you still have to meet the criteria in the legislation. If you apply more than one year after the expiry of the original 90 day period, the CRA will not accept your request and the Court has no discretion to extend this deadline. If you find yourself in this position or you are in any doubt as to the calculation of the original Objection deadline, you should seek professional help as there are several technicalities that could apply and you may be able to ask the CRA to amend your returns or apply for Taxpayer Relief instead.
How do I file an Objection?
There are two ways to file an Objection:
An Objection can just be a letter with a heading that clearly says you are objecting to an assessment such as this or you can use the CRA Form T400A, Objection - Income Tax Act. For GST/HST Objections, you must use Form GST159 Objection - GST/HST and can add additional pages as necessary. It can also be helpful to include a copy of the assessment that you are objecting to. In all cases, you have to provide the reasons as to why you think the CRA are wrong as well as all the relevant facts and documentation. You cannot just say “I Object because the CRA are wrong” – you have to explain why and have supporting documents to show they were wrong.
If you do not yet have all your arguments or documentation to support your Objection, you should file a Protective or Basic Notice of Objection such as this to have your dispute noted on file and then you can send in further information once you have all your documents ready or an agent is assigned to your file. A basic Notice of Objection would just set out why you disagree with the assessment in general terms and indicate that you will send more details and documents at a later stage, which helps to buy you some time to get everything ready. You will usually receive confirmation of filing an Objection in a letter such as this within a few weeks of filing your Objection but it will take the CRA at least a few months to assign an agent to review your file, giving you time to work on the details of your Objection. Once you start speaking to the appeals agent assigned to your file, it is sensible to make sure they have everything you sent in as often letters get lost within the CRA and the agent could be missing important documents on you file.
How do I write a Good Objection?
The best Objections spoon feed the Appeals Officer the evidence they need to justify making a decision in your favour. You want to lay it out for them very clearly and logically and explain everything you can.
As you have to prove the CRA were wrong, it is important to first understand why they made changes to your account and then you can properly explain and prove that those changes were incorrect. Most assessments or determinations will have an accompanying letter that explains what the CRA are proposing to change and this is a great starting point to get information. You may also be able to find out more through General Enquiries at 1-800-959-8281 for individuals or 1-800-959-5525 for businesses. By far the best method of obtaining information about an assessment is to request copies of your tax file to see the internal reports and reasons for the decisions that were made in your case. This is strongly recommended for all audit files so you can get a copy of the Auditor’s Report and working papers and go through their reasons and Assumptions. Some Auditor’s will give this to you voluntarily if you ask for it but usually you have to file a Privacy or Access Request. Having a clear understanding of the CRA’s position on your file is absolutely vital to being successful in your Objection and the more you can relate to what is already on the CRA files, the stronger your Objection will be. A Notice of Assessment is considered to be a determination of an amount of tax owing and you can raise any matter relevant to the calculation of taxes in an Objection, even if this was not on your original return. For example you may want to claim additional expenses that you forgot on your original return to help reduce your final balance owing.
Once you know why the CRA made their decisions and where they made mistakes, you need to find ways to demonstrate they are wrong. There are two main ways the CRA can be “wrong” – they make a mistake on facts or they make a mistake as to the law. Auditors and Appeals agents, like most people at the CRA, are not usually lawyers or accountants. They are following a manual and applying it to the facts of your case. A mistake as to a fact would be something like saying the $100 from your aunt was not a gift when it was and a mistake as to law would be saying that gifts are taxable, which they are not. Most Objections will deal with facts and facts are often easier for taxpayers to argue than delving into the law itself. To prove a factual conclusion, you just need evidence or supporting documents. To prove the CRA made a mistake interpreting the law, you are going to need to do legal research of Statutes as well as Case Law.
For arguments relating to facts, the CRA is a very evidence driven organization and the key to whether you will win or lose your Objection is all in what supporting documents you can provide. Finding good supporting documents requires time and effort and there are rarely easy shortcuts. You can write as many letters as you want saying that certain money was a gift or that your expenses claimed were genuine but the only way the CRA will believe you is if you have something that can prove what you are saying is true. The most common forms of supporting documents are receipts and bank documents and you may have to go back to your bank and ask for old statements to give to the CRA. The CRA may have already obtained these from the bank directly so you should check the auditor’s file before requesting them from the bank as most banks will charge you around $10-$15 per statement you request.
Often taxpayers are forced to prove they didn't do something, such as that they were not running a business or didn’t sell their old couch for a profit, which can be very difficult. The CRA will not give much weight to self-serving declarations, letters or even sworn statements such as Affidavits, so if you can it is always better to have someone else who has first-hand knowledge of a situation give you a letter or an affidavit about what they remember. The CRA also seem to be stuck with the idea that statements from doctors, teachers, lawyers or other professionals are more reliable than statements from friends and family so this is something to bear in mind when collecting evidence to support your case. It is a good idea to get imaginative with how you can prove something and find as much independent confirmation that you can. Saying you can’t remember won’t help and the more detail you can provide the more genuine your version of events will seem. You can also use the time between filing an Objection and when it is reviewed to keep logs of your activity that could help support your claims for previous years, such as how much you use your car for work purposes or what you purchase in particular stores. Every little bit helps! You can read some creative ways to find supporting documents here. Sometimes the CRA will say it is “not their policy” to accept a certain type of supporting document, such as a Visa Statement without receipts, or will not give enough weight to it and in situations like this it can be useful to try and find other cases where supporting evidence like yours was allowed by the Courts. If you need to make legal arguments as well as factual ones, it is a good idea to speak to a professional and you can also use the many tools available on the web to do research by yourself.
What do I send to the CRA?
The package that you send to the CRA as your Objection will ideally be a printed letter with explanations that reference specific numbered documents that are organized by tabs. It should be easy to read and should not be hostile towards the CRA as appeals agents can be very useful when they believe you and want to help. You can see our Example Notice of Objection to get an idea of how to present your arguments. The clearer and more organized your Objection is, the better received it will be. Even if you are not sure if a document is relevant, if it supports your case, you should include it. Don’t forget to keep a copy of everything you send to the CRA along with proof of how and when it was sent. It is not a good idea to send originals of documents to the CRA unless they specifically demand them and even then, you should keep Notarized Copies of everything in case the CRA lose them. In the well-publicized tax case of Irvin Leroux, the CRA lost copies of a taxpayers records and then assessed him for taxes based on an estimate of his income, which he was then unable to disprove because of the lost records.
Effect on Collections
If you are disputing Income Tax only, collection action will cease while your Objection is being considered. This should be shown on any Statement of Account that you receive as it should list an amount in dispute separately to your balance owing, such as in this example. Sometimes the collections department do not notice there is an Objection on file and if you are receiving collection letters while you have an Objection in place, you should call and inform the agent of the Objection to have it noted in your file. If the CRA pursue unilateral collection action such as Garnishments or refuse to pay your refunds, this is illegal and you should call to speak to someone and make a complaint immediately. You should not file an Objection simply to stop collection action as there can be penalties for this.
If you are disputing source deductions or withholdings or GST/HST, collection action will not stop when you file an Objection and you have to pay the amount in dispute despite the ongoing disagreement. It may be possible to provide Security for your debt or establish a Payment Plan as a way to deal with the burden of paying a debt in dispute.
As long as your debt is unpaid, interest will be charged on all balances and will be payable in full if your Objection is unsuccessful. The CRA charge interest at 4% above prime rates and it is compounded daily so your debt can almost double if the Objection takes a long time to process. It is a prudent business decision to limit your potential losses by paying a debt that is in dispute just to prevent the accumulation of interest charges. This is not an admission that you agree with the debt and it is perfectly legitimate to pay a debt that is in dispute simply to minimize the interest charges. Should you subsequently be successful in your case, any additional amount you have paid will be refunded to you with some interest.
What Happens after I file an Objection?
Within a few weeks of filing your Objection, you should receive a confirmation letter from the CRA such as this. The Minister is required to address your Objection with all due dispatch but this has no specific time definition. A typical Objection is likely to be assigned to an Agent and resolved within approximately one year of filing, however, some Objections can be held in Abeyance for years if the issue is common to multiple taxpayers.
Once the CRA review your submissions, they choose whether to confirm the original assessment or if they feel there are grounds to reconsider the assessment by vacating (removing) or varying it. Most appeals agents will send a proposal letter outlining their decision and reasons and ask for any further submissions before they issue any notices. This can be a great opportunity to focus on any key sticking issues with the appeals agent and to negotiate which areas the agent will be willing to address. Once the CRA make their final determination, a Notice of Confirmation will be sent if the CRA feel no changes are necessary to the assessment and a Notice of Reassessment will be sent if the CRA decide to vary or vacate the assessment.
Although settlements are not expressly permitted in terms of your overall debt, agents will often accept the facts presented in relation to one argument if a taxpayer agrees not to pursue another. An example of this would be where an agent may accept your telephone expenses but disallow your meals and entertainment as part of a compromise. Alternatively, it could be a compromise as to the value of an asset or the valid amount of a donation that was made. The success of such negotiations varies widely between different situations and appeals agents. If a settlement is possible, some appeals agents will present the taxpayer with a Waiver of Right of Objection or Appeal to sign agreeing to the proposed changes and confirming you will not take any further action to dispute the assessment if made on the terms specified. If the waiver is not signed by the taxpayer, the CRA may re-assess according to their own records and without reference to any prior settlements or agreements so it can be a very persuasive document. If you have no intention to appeal to Tax Court and feel the proposal is sufficient that you will end your dispute, accepting the offer and signing the waiver can be a prudent course of action. It is very important you understand the consequences of signing such a waiver and it is always recommended you speak to a professional before giving up your rights. If you still want to dispute amounts or have adjustments that are not agreed in the waiver, you should not sign it and wait for the notices to be sent by the CRA so you can pursue your appeal to Tax Court. To date, the CRA appear to be reluctant to include alterations to interest charges at this stage of negotiations and instead indicate you should apply for Taxpayer Relief after the reassessment. The grounds for taxpayer relief are interpreted narrowly by the CRA and these applications so this should not be relied upon as being a guarantee that interest will be reduced.
What if I disagree with the Appeals Decision?
If you disagree with the final decision of the Appeals agent, you should appeal to Tax Court to continue your dispute. You have 90 days after the mailing of your Confirmation or Reassessment to make this decision and you should insist that the Appeals agent provide you with a copy of their decision report so you can properly evaluate whether it is worth initiating a Tax Court appeal.
Appealing to Tax Court is more complicated that the Objection process and while it is prudent to have representation to help with the rules of procedure, many taxpayers are self-represented in Court. Full representation by a lawyer in Tax Court can be very expensive, frequently over $5,000, so you should think carefully about what you need a lawyer to do and your chances of success. If you are disputing less than $12,000 in federal taxes (excluding interest and provincial tax) then you can look at the Informal Procedure in Tax Court as a way to simplify your appeal. Many tax appeals are settled prior to trial if the Department of Justice and the taxpayer are able to reach a compromise beyond that which the CRA were willing to provide. You can read more about the procedures for appealing to Tax Court in our guide.
What can’t I file an Objection to?
Your Objection must relate to the figures indicated for the lines on your tax return and cannot relate to the section on your assessment that shows a previous balance. You need to object to the specific assessments that created that balance for the Objection to be valid. If you want to ask the CRA to reduce the interest charges on an assessment, this should be done through a Taxpayer Relief Application and not through an Objection unless you are alleging the interest was improperly calculated.
There are some limits and types of assessments that you cannot object to and these are set out in the legislation (see section 165). If you think any of these apply you should speak to a professional as they are too complex to address properly in this guide. Two of the most common limitations are that you cannot object to an assessment for which you waived your rights of appeal or for which there has been a Court Order. You also cannot object to assessments cancelling interest and penalties under s. 220(3.1), which simply means that if you feel the CRA did not waive or cancel sufficient interest and penalties then you must apply to the Federal Court for Judicial Review rather than file an Objection.
The Objection process is meant to be simple and to provide an easy means of having the CRA take a second look at their decisions. If you have a good understanding of the CRA’s reasons as to why they made changes to your returns or assessments and have enough evidence to prove the changes were wrong, you should be successful in having the adjustments reversed. If you are ever unsure of a particular argument or what to do, reach out and get help. The CRA are not technically there to help you but they can be a good starting point for information. Many accountants and lawyers will provide free consultations and the internet means anyone can access legal resources. My own practice will review your drafts of submissions to the CRA and make suggestions as to how they could be improved at a fraction of the cost of hiring someone to do everything for you. Taxpayers should never just pay an assessment because it is cheaper than arguing against the CRA and there are always cost-effective ways to correct errors on your assessments.
- What is a Notice of Objection?
- When should I file an Objection?
- Is there a cost to file an Objection?
- What is a Notice of Assessment?
- What is a Notice of Re-Assessment?
- What is a Notice of Determination?
- How do I know when the CRA have changed something on my return?
- How do I find out why the CRA changed my return?
- How do I contact the CRA?
- How do I get information from the CRA?
- How do I ask the CRA to informally adjust my return?
- What are the deadlines for filing an Objection?
- How do I calculate the Objection filing deadline?
- What is an Application for an Extension of Time?
- What can I do if I am out of Time to file an Objection?
- How do I file an Objection?
- Why should I send letters by Registered Mail or Fax?
- What is a basic Notice of Objection?
- Where do I send an Objection?
- How do I send more information to the CRA after filing an Objection?
- What can I use as supporting documentation?
- How to find Good Supporting Documents
- How do I request old bank statements?
- How to Research Legal Arguments
- When will I get a response to an Objection?
- Should I sign a Waiver?
- Should I pay my debt while it is in dispute?
- Can I provide security for a Tax Debt?
- Can I settle with the CRA?
- How do I calculate the amount in dispute?