Canada – Guide to Filing a Notice of Objection and Extension of Time Application

Posted on by Tax Partners
Luxury Tax - Corporate Tax Canada
24
Dec

Filing Tax Returns: The Starting Point in Tax Administration

Under subsection 150(1) of the Income Tax Act, taxpayers in Canada are required to file an income tax return each year without waiting for notice or demand from the Canada Revenue Agency (CRA). Once a return is filed, the CRA reviews it and assesses the taxpayer’s tax liability, interest, penalties, refunds, or losses as per subsection 152(1).

The CRA will then issue a Notice of Assessment under subsection 152(2). In cases where a taxpayer fails to file a return, the CRA may issue an arbitrary tax assessment under subsection 152(7).

Filing a Notice of Objection

If you disagree with a Notice of Assessment or Reassessment, you can file a Notice of Objection under subsection 165(1) of the Income Tax Act. This is the only way to preserve your right to appeal and challenge the assessment.

What Should a Notice of Objection Include?

  • Factual Background: Explain the circumstances surrounding the disputed issue.
  • Legal Arguments: State the reasons for your objection based on tax law.
  • Scope of Objection: The objection should focus on the amounts of tax, penalties, and interest.

Deadline to File a Notice of Objection

You must file the objection by the later of:

  1. One year after your filing due date for the year.
  2. 90 days after the CRA mailed the Notice of Assessment or Reassessment.

Filing an Extension of Time Application

If you miss the deadline to file a Notice of Objection, you can apply for an extension of time under section 166.1 of the Income Tax Act. If the CRA denies your request, you can apply to the Tax Court of Canada under section 166.2.

Section 166.1 Extension of Time Application

  1. Requirements for the Application:
    • Provide reasons for missing the deadline.
    • Submit the application to the Chief of Appeals at your local CRA office.
    • Include a copy of the Notice of Objection.
  2. Preconditions:
    • File the application within one year of the missed deadline.
    • Show that you had a valid intention to object.
    • Demonstrate that granting the extension is just and equitable.

If approved, the Notice of Objection is deemed filed on the date the CRA communicates its decision.

Section 166.2 Extension of Time Application

If the CRA denies your section 166.1 application, you can apply to the Tax Court of Canada within 90 days of receiving the decision. Submit:

  1. Three copies of the extension application.
  2. Three copies of the CRA’s decision.

The requirements for this application are similar to those for a section 166.1 application.

What Happens After Filing a Notice of Objection?

Once the CRA receives your Notice of Objection:

  1. The objection and audit files are sent to an appeals officer.
  2. You can request supporting documents used in the assessment, such as:
    • Auditor’s working papers
    • Relevant court decisions and legislation
    • Appraisal reports
    • Third-party documents

Your accountant will make detailed submissions to the CRA. After reviewing the case, the appeals officer may:

  1. Confirm the original assessment.
  2. Issue a new reassessment.

If you are still unsatisfied, you can appeal to the Tax Court of Canada under subsection 169(1).

Pro Tax Tip: Timely Filing is Critical

  • Extension Applications: CRA is more likely to grant section 166.1 extensions than section 166.2 applications.
  • To avoid losing your right to appeal, file your Notice of Objection on time.
  • If unsure, consult an accountant to determine the best approach.

Frequently Asked Questions (FAQ)

Why Should I File My Returns and Receive a Notice of Assessment?
Filing your return triggers the statutory limitation period (typically 3 years) for CRA audits and reassessments. If you don’t file, the CRA can audit you indefinitely.

Is There a Form for Filing a Notice of Objection?
While there is no mandatory form, you can use Form T400A as a guide for preparing your objection.

What if I Miss the Extension Deadline?
If you fail to file an extension application within one year of the missed deadline, you lose the ability to challenge the assessment.

This article is written for educational purposes.

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.

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