Tax Tip Thursday

This is a case that is making the rounds under the guise of, the CRA has too much power!

Sometimes there are what seem like legitimate errors, but you need to ensure that you address them in a timely manner.

Again – like knowing your tax slips, you need to review your tax returns and assessments to make sure nothing has gone astray.

This is a real case!

Tax slips can also cause problems for taxpayers who receive more than one slip from the same issuer. Are they duplicate slips, separate slips or amending slips? A recent tax case decided earlier this month highlights one taxpayer’s trouble with an amended slip.

The taxpayer is a real estate agent in British Columbia who incorporated a personal real estate corporation such that all real estate commissions he earned were income of the corporation. In 2019, the corporation received commission income from a single payor, which issued a T4A slip for 2019 in the amount of $53,258. It then issued an amended T4A for 2019 in the amount of $55,074.

The CRA then made, in the words of the Tax Court judge, “a stupid mistake.” Rather than recognizing that the amended T4A replaced the original T4A, the CRA added the amount reflected on the amended T4A to the amount reflected on the original T4A, leading to an erroneous reassessment of the corporation’s income for 2019 of $108,332.

The taxpayer testified that he first heard from the CRA by letter in August 2022, proposing to reassess his corporation for T4A income of $108,332 for the 2019 taxation year. The taxpayer testified that he called the author of that letter at least twice. He said that the author of the letter agreed that only the amount reflected on the amended T4A should be included in the corporation’s income. He made no notes of those conversations.

The notice of reassessment for the 2019 taxation year was posted on the corporation’s secure online account on October 12, 2022.

Under the Income Tax Act, a taxpayer has 90 days to object to a notice of (re)assessment, in this case that deadline being January 10, 2023.

If a taxpayer misses the deadline, they can file an application within a year asking the CRA to extend the time to object. The extended date would therefore be January 10, 2024. Unfortunately, the taxpayer failed to object to the reassessment until March 24, 2024, which was too late.

In court, the taxpayer argued that he never saw the notice of reassessment. However, the CRA’s computer system showed that it was viewed online on four separate occasions.

Notwithstanding that, the taxpayer said it was the CRA which erred in adding the two T4A slips together.

While the judge was sympathetic to the taxpayer’s situation, his hands were tied. As he wrote, “Although the (CRA) made a stupid mistake in reassessing, I have no discretion to extend the time limitations set out in the Act. … Why this egregious error was not rectified by the CRA’s internal ‘quality control’ remains a mystery.”

So do not ignore those brown envelopes!

Be sure to check your assessments and if it looks like there is a mistake, hire an accountant, contact the CRA and/or take action in writing and courier it.

Although the tax payer claims that he did contact the CRA and documented it, there also does not appear to be any record of that.

From this you can see that the onus is on the taxpayer to ensure your returns and the assessments are completed correctly.

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Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.