Common reasons for invalid tax objections

Contrary to some views, the Canada Revenue Agency (CRA) welcomes and stands behind notices of objection filed electronically. But objections can be rejected on other grounds. Find out some of the most common reasons.

The tax community is usually quick to adopt the CRA’s suite of electronic services. But when it comes to filing income tax objections, some representatives are reluctant to use the CRA’s secure Represent a Client portal. They question whether filing an objection electronically means that it has been “served” under the rules of the Income Tax Act, while others want assurance that objections they file go directly to the Appeals Division.

The CRA has confirmed that it will accept income tax objections that are submitted in electronic form, as long as they are otherwise valid. The Act says notices of objection must be “served by being addressed to the Chief of Appeals in a District Office or a Taxation Centre of the Canada Revenue Agency and delivered or mailed to that Office or Centre” (subsection 165(2)). But the CRA points to another section of the Act that says the “Minister may accept a notice of objection served under this section that was not served in the [prescribed] manner” (subsection 165(6)).

As a result, CRA staff can accept income tax objections through the Register My Formal Dispute option in My Account or My Business Account. With Register My Formal Dispute, you can electronically file a notice of objection to an assessment, reassessment, determination or redetermination directly to the intake centres of the CRA’s Appeals Division for review and validation. The intake centres review all income tax objections received electronically in the same way as they review paper-filed objections.

To clarify this issue, the CRA is working to update the instructions on its objections-related webpages and its Register My Formal Dispute service.

Common reasons for invalid income tax objections

Most objections filed with the CRA are valid, but there are situations where the CRA must reject an objection as invalid. According to the CRA, here are some common reasons for invalid objections.

Objections filed late and after the period allowed to apply for an extension of time

The CRA cannot grant a time extension if the objection is filed more than one year after the expiry of the normal deadline for filing an objection.

Accounting issues

You cannot dispute accounting issues by objection or appeal, since they are not part of a tax assessment or determination made under the Act. It follows that the Tax Court of Canada does not have the jurisdiction to rule on these issues.

Examples of accounting issues include:

  • whether an amount of tax was withheld at the source
  • whether tax installments were properly credited to the appropriate tax year
  • whether the Statement of Account reflects a proper debit or credit.

To address these issues, you can find basic information at canada.ca/taxes and its underlying webpages, such as Understanding Notices and Letters. You can also contact the CRA with your questions directly.

  1. Relief from correctly assessed penalties and interest: Requests for relief from correctly charged interest or penalties are not considered to be objections. When the CRA receives these requests in objection form, they are redirected to the Taxpayer Relief Intake Centre. It would be faster to submit a taxpayer relief request electronically using the URL for submit documents online.
  2.  Objections filed early: Taxpayers sometimes object to correspondence from the CRA (e.g., an auditor’s proposal letter) before they have received a notice of reassessment or a notice of redetermination. Since recourse rights only start once such a notice has been issued, you should wait until the notice is received before filing your objection.
  3. Subsequent reassessment for the same tax year: A reassessment that is issued after an objection is mailed or filed nullifies both the original assessment and the objection for the tax year or period. Following receipt of the reassessment, taxpayers may still want to pursue their recourse rights, so they must file a new objection in order to do so.
  4. Objecting to a nil assessment: Objections to notifications that no tax is payable are generally invalid. However, you can still file a valid objection in some special cases where no federal tax is payable. These situations include:
  • assessments of interest only (e.g., interest due to assessing adjustments that are eliminated by loss and tax credit carry-backs from subsequent years)
  • assessments of penalties only (e.g., in loss years or when discretionary deductions, such as capital cost allowance, offset any income inclusion)
  • assessments of provincial tax only
  • assessments of Canada Pension Plan contributions and Employment Insurance premiums

Why object when you can adjust?

Taxpayers or their representatives often file objections to T1 returns when:

  • they want to correct a mistake on a previously filed return 
  • they forgot to include information for a tax deduction, credit or benefit claim
  • they find a missing or new receipt, invoice, information slip (e.g., a T4) or other document
  • they didn’t provide information requested by the CRA and were reassessed

In these situations, you can generally resolve things faster by requesting an adjustment to a return than by filing an objection. You can request an adjustment to a T1 personal tax return in any of these ways:

  • taxpayers can change their T1 returns with the CRA’s secure online service My Account, using the “Change my return” option 
  • authorized tax preparers and EFILE service providers can adjust tax returns for the 2015 and 2016 tax years by using the CRA’s new ReFILE service
  • you can request a change in writing by sending a completed Form T1-ADJ, TI Adjustment Request to your tax centre

You can find more information about adjusting T1 returns on the CRA’s How to change your return webpage.

For adjusting T2 returns, if the company or an authorized tax preparer filed a T2 return electronically, using the CRA’s approved Corporation Internet Tax Filing software, the same software can be used to efile an amended T2 return with any adjustments incorporated. You can also make a request in writing by sending a letter explaining the change to your tax centre.

We have heard from practitioners who feel compelled to file objections due to concerns that the time limit for objecting may expire while the CRA is considering an adjustment request, or that the opportunity to object may be missed if an adjustment request is denied by the CRA. We understand these concerns, and we will continue to have discussions with the CRA with the goal of streamlining the process.

At the same time, it’s in everyone’s best interest to reduce the number of objections by seeking other ways to resolve tax issues when possible.

Keep the conversation going

Have you encountered any issues when filing notices of objection electronically with the CRA? What are your ideas on how the CRA, taxpayers and their representatives can help ease the backlog of tax appeals? Post a comment below.

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues, and their impact on those who practice tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Bruce Ball, FCPA, FCA, CFP

Vice-president, Taxation, CPA Canada