Arbitrary (Tax) Assessments

This week we look at another topic that has come up recently with new clients…navigating arbitrary tax assessments.

Revenue Canada has the authority to issue arbitrary (or notional) tax assessments to taxpayers who fail to file income tax, payroll or GST/HST returns on time. Arbitrary assessments are CRA’s estimate of tax owing and are (unsurprisingly) almost always too high. The Canada Revenue Agency typically uses previous tax filings and any information relating to the taxpayer on file. Interestingly, there is no legal obligation for the CRA to do this accurately, hence why it almost always costs more in taxes. Contrary to the lack of legal obligation from the CRA, the taxpayer is legally obligated to pay the amount in the arbitrary tax assessment.

If you receive a tax assessment in the mail for a taxation year or reporting period for which you know you did not file a return, then it is probably an arbitrary assessment. Ignore this at your peril.  After 90 days your ability to object is drastically reduced, if not virtually eliminated. As with any correspondence from CRA that you find confusing, please ask me for help.

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