Understanding the Tax Audit & Appeal Process
Once you file your tax return with the CRA, the return goes through a pre-assessment screening by the CRA. The pre-assessment screening is typically a very basic review of the information you filed in your return. If the CRA has any questions at that time regarding your return or the information you have provided, they will contact you and ask you to provide such information or documentation to support the amounts you reported in your return. For example, they may ask you to provide receipts to support the charitable deductions you claimed in your return or invoices and receipts to evidence any moving expenses you may have claimed. Once the pre-assessment screening is completed, the CRA will issue to you a Notice of Assessment.
Merely because you’ve received a Notice of Assessment from the CRA does not mean you are out-of-the-woods yet. The Income Tax Act gives the CRA broad powers to conduct a subsequent and much more detailed review or audit of your income tax return. If you have been selected for an audit, the CRA will generally send you a letter informing you that they intend to audit your tax return, telling you when they would like to start the audit, and instructing you on the information and documentation that you are to make available to them for their inspection. Once they have completed their audit, the CRA will send you one of two possible forms of letters. The first, if you are one of the very few and very lucky, is a letter informing you they have completed their audit and that they have no changes or adjustments. The second, and much more common, is a Proposal to Reassess Letter. This letter will inform you that they are in the process of completing their audit, that they are proposing to reassess you, and providing details of the changes and adjustments that they propose to make. The letter will then inform you that you have 30 days from the date of the letter to provide further information or submissions regarding the CRA’s proposed reassessment. Once they have reviewed any further information you have provided to them, the CRA will then issue to you a Notice of Reassessment that will set out the additional taxes they believe you owe, along with any interest and penalties that they have assessed.
Upon receipt of a Notice of Reassessment, you have 90 days from the date of mailing of the Notice to file with the CRA a formal Notice of Objection to the reassessment. Your Notice of Objection will then be considered by the Appeals Division of the CRA. The CRA’s Appeals Division may:
Once you receive a Notice of Decision from CRA Appeals in respect of your Notice of Objection, you have the right to appeal that decision to the Tax Court of Canada. However, in order to do so, you must file a Notice of Appeal with the Tax Court of Canada (and pay the prescribed filing fee) within 90 days of the date of mailing of the CRA’s Notice of Decision.