CRA Notice of Objection and 4 other Canadian Tax Terms You Should Know
The Canadian tax system is a muddled complication of laws built over the past 150 years. Before 1920, the Canadian tax code was smaller than ten pages, today it is over 1400 pages long! CRA Auditors regularly make mistakes and those errors are what created the need for tax lawyers and tax consultants. Here we present six tax terms that every Canadian should know with a focus on the Notice of Objection.
Notice of Objection
A CRA Notice of Objection is a formal declaration filed by a taxpayer when they disagree with the Canada Revenue Agency (CRA) regarding their tax assessment or reassessment. This notice serves as the first stage in the dispute resolution process between the taxpayer and the CRA.
What is a CRA Notice of Objection?
The CRA Notice of Objection is a legal document that a taxpayer uses to challenge the CRA’s interpretation of the tax law as it applies to their specific situation. The objection can be about various issues, such as the amount of income, deductions, or credits reported on a tax return, or about the CRA’s decision to deny a deduction or credit.
Purpose of a CRA Notice of Objection
The main purpose of filing a Notice of Objection is to rectify any perceived inaccuracies in the tax assessment. It provides taxpayers with an avenue to dispute the CRA’s findings and offers a platform for dialogue with the agency.
The Process of Filing a CRA Notice of Objection
To file a Notice of Objection, the taxpayer must submit a completed Form T400A, Objection – Income Tax Act, or write a letter stating they want to object. The Notice of Objection should contain the name and contact information of the taxpayer, the taxation year in question, a detailed explanation of the issue and the reasons for the objection.
The Notice of Objection should be filed within 90 days from the day the CRA mailed the Notice of Assessment or any later date that is allowed by the Income Tax Act. Once the CRA receives the Notice of Objection, the Appeals Division will review the objection and make a decision.
Implications of a CRA Notice of Objection
Filing a Notice of Objection can have significant implications. It may lead to a resolution of the dispute, but it can also escalate the matter if the CRA and the taxpayer cannot agree. If the disagreement persists, the taxpayer may appeal to the Tax Court of Canada, which is a more formal and potentially costly process.
Example of a CRA Notice of Objection Scenario
For instance, let’s consider a scenario where a taxpayer, Mr. X, receives a Notice of Assessment stating that he owes additional taxes due to unreported income. Mr. X believes this is a mistake, as he has accurately reported all his income. In this case, he can file a Notice of Objection providing evidence of his reported income and explaining why he disagrees with the CRA’s assessment.
What is the CRA’s voluntary disclosure program?
The Voluntary Disclosures Program (VDP) is an initiative by the Canada Revenue Agency (CRA) that allows taxpayers to correct inaccurate or incomplete information, or disclose information not previously reported. Through this program, individuals, corporations, trusts, and other entities can rectify their tax status while potentially avoiding penalties or prosecution. This program promotes compliance with Canada’s tax laws by encouraging taxpayers to voluntarily correct previous omissions in their dealings with the CRA.
What does it mean to be assessed under a Section 160 Transfer with the CRA?
A Section 160 Transfer assessment by the Canada Revenue Agency (CRA) refers to a situation where a taxpayer transfers property, either directly or indirectly, by means of a trust or by any other means whatever, to a spouse, common-law partner, or a minor, while being indebted to the CRA. The person who received the property may be held responsible for the tax debt up to the value of the transferred property at the time of the transfer. This provision is part of the Income Tax Act to prevent tax evasion by transferring assets to another person.
What does it mean to have GST and Payroll Source Deduction Arrears?
GST and Payroll Source Deduction Arrears refer to outstanding amounts owed to the Canada Revenue Agency (CRA) in relation to Goods and Services Tax (GST) and payroll source deductions. GST arrears occur when a business fails to remit the correct amount of collected GST back to the CRA within the stipulated time period. Payroll Source Deduction Arrears, on the other hand, happen when an employer does not remit the correct amount of income tax, Canada Pension Plan contributions, and Employment Insurance premiums withheld from employees’ pay. These arrears need to be paid, or arrangements must be made with the CRA for a payment plan. These debts are also referred to as trust debts.
What does Director’s Liability refer to in Canadian tax law?
Director’s Liability in Canadian tax law refers to the legal responsibility that directors of corporations hold for the unpaid tax liabilities of the corporation. This can include GST/HST, payroll source deductions, and corporate income tax. If a corporation fails to remit these taxes, the Canada Revenue Agency (CRA) can hold the directors personally liable and pursue them for these debts. However, it’s important to note that the CRA must prove that the director acted in a negligent or fraudulent manner, or that they didn’t exercise the degree of care, diligence, and skill that a reasonably prudent person would have exercised in similar circumstances.
