So you've received one of those depressing brown envelopes from the Canada Revenue Agency (CRA). It's your Notice of Assessment. If they say you owe more taxes, go ahead and curse or stamp your feet or whatever you need to do to get it out of your system in the privacy of your own home. Once you've calmed down, bear in mind that this isn't the end of the story. If you disagree with the CRA's Notice, take heart! There are a number of things you can do to object to the CRA's demand for more tax.
Why, why, why?
The first thing you must do is find out why the CRA has disallowed a claim or otherwise increased your taxes. If there's a difference between your figures and theirs, it's quite possible that no one has even looked at your return beyond a data entry clerk. You have a legal right to appeal your case and, more importantly, if you do this properly, you stand a very good chance of winning.
The first place to look is on page 1 of your Notice, which is captioned "Explanation of changes and other important information." In the vast majority of cases, this explanation is computer-generated – and much of the "explanation" you find on the page may actually have nothing much to do with the discrepancy.
In fact, at this stage, the vast majority of problems relate to some type of clerical error. If your return has not been prepared and filed electronically, you may have made an error, or perhaps a CRA clerk has simply entered a figure incorrectly. In other cases, there may be problems with the application of installment remittance (e.g., they've applied it to the wrong year or, worse still, to a different taxpayer). Other discrepancies that sometimes appear might include a late-filing penalty even though you filed on time, or an information slip or receipt that was missed during a manual check of your return.
When reading the explanation of changes, look for something that doesn't ring a bell, especially if there are numbers shown in the particular paragraph.
If, after reading the explanation, you still don't know what's going on, then take a look at the "Summary" calculations contained in the notice. On the left-hand side of the page, you will see key data fields duplicated from your tax return, with the CRA's calculations on the right-hand side of the page. Compare these to your return on a line-by-line basis, and you should be able to zero in on where the discrepancy is.
If you're still in the dark after all this, an option is to call the folks at your Tax Services Office and ask them. (Of course, another option is to go to an accountant.) The Notice of Assessment itself provides a phone number to request an explanation – even though the Notice of Assessment itself purports to give one.
Don't assume that if and when you get through to a live person on the line, they will be an expert on the matter in question. This simply isn't the case. In many cases, the CRA employees who staff the information lines may not have particular expertise in your problem and will certainly not be familiar with your tax return.
Contacting the CRA
Once you understand the problem and you think that you're in the right, your next step is to contact the CRA itself. You may do this in writing – by sending your enquiry to the Tax Centre to which you sent your return. Address it to the attention of the Enquiries and Adjustments Division at the address on the front of the Notice. Requests by phone or personal visits should be directed to the Tax Services Office that serves your area.
The Notice of Assessment itself indicates that if the problem can't be resolved, you can contact the tax office's "Problem Resolution Program." The phone number is listed in the government pages – there is a separate listing under the name of each Tax Services Office.
If the matter is straightforward and in your favour, so that it could be resolved on the spot, a visit to the Tax Services Office may be a good way to go, if you're able to take time off work. You should have your Notice of Assessment and your copy of your tax return with you. The CRA official will pull up your return, key in the adjustment, and you're finished: This sure beats waiting for weeks for them to respond to a letter. However, if the matter is more complicated, a letter may be a better way to go.
Once a Notice of Assessment is received, collection procedures may commence immediately. However, the collection procedures should stop if a Notice of Objection is filed on a timely basis.
Although some people go straight to a Notice of Objection, contacting the Enquiries and Adjustments section will give you an extra kick at the CRA, just in case there's a problem.
How to deal with the CRA
When contacting the CRA, I suggest the following:
- If you write a letter, put "Re: [your name]; [your Social Insurance Number] – 2015 Notice of Assessment" prominently at the top of the letter; in most cases, you should state that there has been an incorrect assessment; give the line number, the previous amount, the amount of the adjustment and the revised amount. Don't forget to include your phone number and name and address.
- Provide any reasons or details and whatever backup documentation may be relevant, even if you have already included it with your tax return. What you want to do is give the CRA adjuster a "self-contained package," so that he or she can zero in on the problem;
- In general, you should keep your correspondence with CRA factual and to the point. The CRA's interest is in resolving the dispute as quickly as possible. They don't want to hear your life story, or what you think of the government and our tax system.
A matter of interpretation
The CRA will, as a matter of standard procedure, reassess returns if the adjustment relates to an error in arithmetic or a misunderstanding of the facts. If your dispute is based upon a different interpretation of the law, you have to file a Notice of Objection. You'll find more information about filing a Notice of Objection at the CRA website.
In many cases, your letter to the CRA may be sufficient to clear up the matter in your favour. But if it becomes necessary to actually talk to a CRA auditor, always be courteous and to the point. I am convinced that a great many serious disputes with the CRA arise because of personality conflicts – where someone draws the ire of a CRA auditor. Getting along well with the CRA goes a long way towards success.
Previously published in The Fund Library Thursday, June 9, 2016
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.