Tax Disputes
On April 7, 2011, the Globe & Mail posted a blog entry in the “Home Cents” Blog on the right way to deal with tax disputes. It listed five tips taken from the office of the Taxpayer’s Ombudsman regarding tax disputes. While the tips are helpful, they don’t address the following issues that I find most taxpayers have questions about.
The first issue is determining the proper course of action. There are a number of possible avenues that one can go through to satisfy a dispute with CRA or a provincial equivalent. Depending on the nature of the dispute, a taxpayer could file: a notice of objection, a taxpayer relief request, an application to amend a tax return, or a judicial review in the Federal Court of Canada, or something else. The determination of what is the most advantageous course of action depends on the type of relief one is looking for and where you are in the dispute resolution process.
This leads to the second major issue, which is the timeframe taxpayers have to begin their dispute. Each course of action has its own deadline to start the process, but they all share one common element – the deadlines are firm and cannot be extended unless specifically allowed under a particular statute. For example, if a taxpayer wants to file a notice of appeal for a Ontario Retail Sales Tax issue, the taxpayer must file the notice of appeal 90 days from the notice mailed by the Ontario Ministry of Revenue which completed the objection process.
Further complicating matters are the different deadlines contained in different statutes to initiate these processes. For example, under the Income Tax Act, one has 90 days from the date of assessment to file a notice of objection. Under the Retail Sales Tax Act (Ontario), one has 180 days from the date of the assessment to file a notice of objection. Further, some statutes have a provision which allow taxpayer to apply for an extension of time to file a notice of objection. However, these deadlines differ between different statutes.
Finally, the last large issue is determining what relief is available. In general, the CRA and their provincial equivalents can only settle matters on a principled basis. This means that they can only settle a matter if it can be justified under provisions of the taxing statute. For example, CRA and a taxpayer may settle on the amount of allowable expenses a taxpayer may have in a particular year by agreeing to an amount that was actually incurred for business purposes. However, CRA and a taxpayer cannot settle that same matter by simply looking at the bottom line and settling the matter for a percentage of the liability. This means that the CRA and their provincial equivalents are limited in the types of settlements they can negotiate.
Given the complexity, it is advised that a taxpayer seek the advice of a tax lawyer when they have a tax dispute to ensure that they take the course of action that can lead to the result they want.