You have only a limited time frame for which you are eligible to file a notice of objection. If you delay and miss this time frame, you will not be eligible to appeal your case. For an individual, you have the later of 90 days from the filing of the notice of (re)assessment or one year from the due date of the tax return. For example, if your 2008 tax return was due for filing on June 15, 2009, and you received a notice of assessment that you disagreed with in August 2009, you will have until June 15, 2010 (one year from the due date of your 2007 tax return), to file your notice of objection. On the other hand, if you received a notice of reassessment for your 2007 tax return dated November 30, 2009, you will have until February 26, 2010, to file your notice of objection. For a corporation, you have to file a notice of objection within 90 days of the date of the assessment or reassessment notice.
Complete Form T400A for notice of objections to ensure Canada Revenue Agency processes your objection properly.
Once the notice of objection is received by Canada Revenue Agency it is given to the appeals branch of the district taxation office. The appeals branch will provide an independent review of your situation. They may request additional information or an interview. After they have reviewed your case they will either issue a new reassessment notice or confirm the original assessment or reassessment.
If you still don't agree at this point, your next course of action is to appeal to the Tax Court of Canada. Here you have a choice: you can either appeal using the general procedure or the informal procedure. The general procedure requires you to hire a lawyer to represent you. If the tax and penalty amount in dispute is greater than $12,000 federally, then you will have to use the general procedure.
With the informal procedure, you can represent yourself or have a friend, your tax coach, or a lawyer represent you.
This can be a less costly procedure and less formal. However, it is still a complicated procedure. You would be wise to have some assistance from someone who knows the system and can assist you competently.
If you win or lose at this level, you or Canada Revenue Agency may be able to appeal to the Federal Court of Appeal.
If you or Canada Revenue Agency are unsuccessful at this level, in very rare circumstances you can appeal to the Supreme Court of Canada. Very few tax cases make it all the way to the Supreme Court of Canada.
The appeal process can be very costly and can take years to complete. Save yourself time and money by addressing the issues early on and seek the advice of your tax coach. Make sure you pick your fights wisely. A wrong move here can cost you a lot of money and aggravation.
File your notice of objection on time to keep your appeal rights alive.
Should I Pay Tax That Is Under Dispute?
Canada Revenue Agency has assessed you tax which you are appealing. Should you pay the tax liability or wait until a decision has been reached on your appeal? Generally, upon filing a notice of objection, the tax department will stop collection proceedings. However, it may still be advisable to pay the outstanding tax. In most cases the decision boils down to how confident are you that you will win and can you afford to pay the tax.
If you don't pay the tax and you lose your appeal, you will not only owe the tax liability but also interest that has been compounding daily. And as discussed earlier, this interest is not tax deductible. On the other hand, if you pay the outstanding tax, you stop the interest clock. And if you win, the government will pay you interest on the amount you overpaid.
Of course, you will have to include the interest as income on your tax return in the year that you receive it.
If you can afford to pay the tax, generally the wise thing to do is pay it even if you don't agree with the calculation. Paying the tax does not represent an admission that the tax department is correct. It in no way affects your right to appeal. It does however stop the interest clock which over time can add up to a lot of money.