Once an auditor has finished most of their audit work and have found an assessment, they are required to send a proposal letter, giving you 30 days to respond.
A Notice of Assessment is always issued at the end of a CRA or PST audit, whether there was a change to tax owing, or not.
If you don’t agree with your assessment, you have 90 days from the date on the Notice of Assessment to do something about it. The form to do this is called a Notice of Objection. The department that handles these is called the Appeals Division.
The Appeals division is supposed to operate independently from the Audit division. Their job is to make sure audit adjustments are legally correct and supported by appropriate audit evidence.
There is a final recourse level, called Tax Court. These cases are heard by real Supreme Court justices. If you are still in disagreement with CRA, enough to retain a tax lawyer, then your case will be heard before a judge, who will decide it for you.
It is expensive at this stage, both for you, and for CRA. The CRA actually has to pay for legal counsel out of their budget, just like you do. If they lose, it can open a pandora’s box of problems for them if it sets a legal precedent.
Very few appeals end up in Tax Court because even CRA doesn’t want to go there.
The problem with the Appeals process is that it is very slow. It takes approximately 143 days to resolve low-complexity objections, and 896 days for higher complexity.
You might think CRA would delay taking collections action while an assessment is being appealed. This is partially true: for income tax assessments, they will wait. But for GST assessments, the CRA can, will and has taken collection action while an appeal is ongoing, even if the delay is CRA-caused.
It is still possible to file a Notice of Objection after the 90 day period is expired, up to one year, if you can demonstrate your failure to meet the deadline was due to circumstances outside of your control.
Hopefully, you will call Gateway Tax early on in the audit stage. But if an assessment has already been issued and you don’t agree with it, give us a call for a free consultation.