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Dealing with the CRA’s Notice of Assessment
10/21/2017 6:16:51 AM
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TAX PLANNING
Tax-saving tips and strategies from a leading Canadian tax-planning expert.



By Samantha Prasad  | Tuesday, June 13, 2017


 



By now, most taxpayers will have received that distinctive plain brown envelope from the Canada Revenue Agency – the Notice of Assessment. Some may be the recipients of good news: no changes and perhaps a refund. Others may have that sinking feeling: Bad news from the CRA, disputing your return and demanding even more money. But take heart! All is not lost. Here’s what you can do if you got some bad news from the CRA.

If your Notice of Assessment is unfavourable, the first thing you must do is find out why the CRA has disallowed a claim or otherwise increased your taxes payable. If there’s a difference between your figures and the CRA’s, it’s quite possible that no one has even looked at your return beyond a data entry clerk if you filed a paper return, or what’s more likely these days, only CRA’s computer itself if you e-filed. 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.

Does the “Explanation” really explain anything?

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 data entry error. If your return has not been prepared using a tax preparation program, you may have made an error in calculation or entry, or perhaps a CRA clerk has simply keyed in the wrong number. In other cases, there may be problems with the application of installment remittances (e.g., they’ve applied it to the wrong year or, worse still, to a different taxpayer). Other discrepancies: There may be a late filing penalty even though you filed on time, or a manual check of your return did not reveal a receipt.

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 of Changes, 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 “boxes” (data fields) in your tax return, with 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.

Contacting the CRA

If you’re still all at sea, one 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 itself purports to give one.

Don’t assume that when you get through to a tax auditor on the line, you are dealing with 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. They will certainly not be familiar with your particular tax return.

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 to the attention of the Enquiries and Adjustments Division at the address on the front of the Notice. Requests by telephone 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. You should have your Notice of Assessment and your copy of your return with you (be sure to take every page of your return with you, including all schedules). The CRA official will pull up your return, key in the adjustment, and you’re finished. That sure beats waiting for weeks for CRA to respond to a letter. However, if the matter is more complicated, a letter may be a better way to go.

Although some people go straight to a Notice of Objection (more on this procedure next time), contacting the Enquiries and Adjustments section will give you an extra kick at CRA, just in case there’s a problem. Note: The collection procedures should stop if a Notice of Objection is filed on a timely basis. However, interest will continue to run on the outstanding amount.

What to put in your letter

When contacting the CRA, I suggest the following:

* If you write a letter, place the following prominently at the top of the letter: Re: [your name]; [Social Insurance Number] – 2016 Notice of Assessment. 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. 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. 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.

In many cases, your letter to 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 CRA arise because of personality conflicts, that is, where someone raises the ire of a CRA auditor. Getting along well with CRA goes a long way towards success.

Next time: How to file a Notice of Objection.

Samantha Prasad, LL.B., is a Partner with Toronto law firm Minden Gross LLP, a Meritas Law Firm Worldwide affiliate, and specializes in corporate, estate, and international tax planning. She writes frequently on tax issues, and is the co-editor of various Wolters Kluwer Ltd. tax publications. Portions of this article first appeared in The TaxLetter, © 2017 by MPL Communications Ltd. Us ed with permission.

Disclaimer

© 2017 by 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. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

 
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