For some, getting a letter from the Canada Revenue Agency that your taxes have been reassessed – and that you owe back taxes – isn’t just a bad dream. The reality is that in most cases, the CRA has three years from your original date of assessment to reevaluate your income tax return. If they can prove willful or careless misrepresentation – or fraud – then the three-year window can be waived.
What Can You Do?
- Pay up. CRA charges 5% interest calculated on a daily basis back from the original tax year – meaning that if you get a letter from the CRA requesting back taxes, you already owe a significant amount of interest on those back taxes. The only way to stop the accumulation of interest is to pay the fine up front.
2. File an objection. You have 90 days to file an objection with the CRA outlining your position regarding your reassessment, which they are obliged to consider. You will be contacted to confirm receipt of your objection, however, it could take months or years for your objection to work it’s way through the process.
3. File an appeal. If you haven’t heard back about your objection within 90 days again, your next option is to file an appeal at Tax Court. Like any court case, you’ll require legal representation and it could take years to resolve. Furthermore, the odds are against you – in these matter, the CRA’s assessment is considered to be correct and the burden of proof is on you.
This is a simplified overview. If you’ve been reassessed and owe back taxes your best bet is to contact a professional, like the accountants at Liu & Associates, who have years of experience working with the CRA that can walk you through the process to get you the best outcome.