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You have been arbitrarily assessed…now what?

October 16, 2023

In Canada we have what is known as a self-assessment system when it comes to taxes.  This means that the individual or the business is responsible for the timely and accurate filing of various tax returns.

There are occasions where these filings are not up to date for whatever reason and that can result in the issuance of an “arbitrary” assessment, in the case of T1 or corporate balances and a “notional” assessment in the case of GST/HST accounts.  These types of assessments are meant to be based on factual information, however, it is often the case that a number of tax periods are outstanding and assessed at one time based on historical information, much of which may not accurately reflect the periods in question.  For example, as a self-employed individual, you may have been unable to work in your chosen field for a length of time and you income has been drastically reduced but you have been arbitrarily assessed based on years with a higher income.  Similarly, your GST/HST returns may not have been filed for some time as a result of the business closing or otherwise but the Canada Revenue Agency will “notionally” assess them based on the history of previous returns which may greatly inflate sales numbers and tax due.

In any case, you have opened the mail and found that you have been arbitrarily assessed.  What should you do?  You should call a professional who can guide you through the policies and procedures of the CRA, advise you of your rights as a taxpayer, file a Notice of Objection as is appropriate and immediately contact the Canada Revenue Agency to determine their course of action.

An objection to arbitrary assessments has to be filed within 90 days and contain certain information.  In the case of a personal, or T1 account, the filing of an Objection will stay any legal action against you until the Objection has been reviewed and resolved on one way or another.  The same is true with regard to arbitrary assessments on corporate tax accounts.  With respect to notional GST/HST accounts, legal action can still take place once the proper warnings are in place because GST/HST are considered trust funds.  An objection is still important, however, to let the CRA know the background of the debt and the potential resolution. 

If you receive notice of these kinds of assessments, read the notice carefully, and call Farber Tax for a consultation as to what the immediate and best steps should be in safeguarding your interests.

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