Objection! Overruled, even on appeal

National Post

2015-05-30



If you filed your 2014 tax return on time by the extended May 5th deadline, you likely have already received your Notice of Assessment. It's important to pay close attention to the mailing date printed on that notice if you plan to challenge it later on by filing a Notice of Objection.

The deadline for filing an objection is one year from the normal filing due date or 90 days after the date printed on the Notice of Assessment, whichever is later. If you miss the deadline, you can still apply to the Canada Revenue Agency within one year of the deadline for an extension of time. The application must include the reasons you didn't object before the deadline and be addressed to the Chief of Appeals in an Appeals Intake Centre. Also, you need to demonstrate that you were unable to object within the time limits, you were unable to instruct someone else to act for you, you had a "bona fide intention to object," it would be just and equitable to extend the deadline and the application was made as soon as circumstances permitted. If the CRA denies your application, you may appeal to the Tax Court of Canada.

Canadians do file objections, nearly 84,000 in 2013-2014 alone; only some 4,500 were appealed to the Tax Court of Canada, according to the CRA Annual Report to Parliament. Let's take a look at a case where a recent taxpayer challenged the CRA on her ability to claim the foreign tax credit. The taxpayer emigrated to Canada in 2007 to join her husband but continued to earn foreign employment income from the U.K. up to July 2010. She received a letter from the CRA informing her that it was reviewing her 2010 tax return and disallowing her foreign tax credit claim. The CRA ultimately reassessed her 2010 tax return on April 16, 2012. The taxpayer had 90 days to object (July 16, 2012) and a further one year to bring the application for an extension of time to object (July 16, 2013). Unfortunately, however, the taxpayer only became aware that there even was a process for a formal notice of objection after she was contacted by a CRA collections officer, on April 15, 2014. Once she discovered that, she filed her objection on May 9, 2014. The CRA rejected the objection and the application for the extension of time "because it was outside the statutory time limit."

As a result, on Sept. 2, 2014, the taxpayer brought an application to Tax Court for an extension of time to serve her notice of objection, but the CRA argued that the application was not made in time and should be rejected.

While the taxpayer acknowledged that her application was beyond the statutory time limit under the tax law, her position was "that the common law duty of 'procedural fairness'… trumps the statutory provisions involving the time limit."

The Judge disagreed, saying that the objections process for tax filings is governed "by a mandatory statutory regime setting out strict time limits for filing objections and applications to extend time in instances where an objection is late filed…The language is clear. The time limit cannot be waived." A harsh result for the taxpayer and an important lesson for all of us.