Tax Tip Thursday

Everybody dreads them. The last thing you want to see when you get your mail is one of those Dreaded Brown Envelopes from the CRA.

There was a case dealing specifically with this recently, so it seems fitting to talk about today.

What Happened?

As individuals, we are bombarded with e-mails every day — from friends, to business, to spam. With so much information crowding our inboxes, it’s possible we may miss an important email once in a while.

But doing so can be costly, especially if that missed email is from the Canada Revenue Agency. You see, the CRA assumes you’ve received their email unless you can prove otherwise.

A recent tax case (DiPierdomenico v. The King, 2023 TCC 146) decided in September dealt with a taxpayer who claimed never to have received various CRA notices dealing with reassessments for multiple tax years.

The taxpayer is a Canada Post mail carrier who had also owned a nail salon. The CRA audited that business and the taxpayer was sent notices of reassessment for his 2011, 2012, 2013, 2015 and 2016 tax years. The taxpayer did not file notices of objection in time to challenge those reassessments, and he also missed the deadlines to apply for extensions.

Under the Income Tax Act, the deadline for individual taxpayers to file an objection is one year from the normal filing due date or 90 days after the date printed on the notice of reassessment, whichever is later. If a taxpayer misses the deadline, they can still apply to the CRA for an extension within one year of the deadline. That application must include the reasons they didn’t object before the deadline and should be addressed to the Chief of Appeals at an Appeals Intake Centre.

Should the CRA deny the application or if the taxpayer doesn’t receive a response from the CRA within 90 days, the taxpayer may further appeal to the Tax Court of Canada.

In the recent case, the CRA testified that on July 4, 2016, it sent notices of reassessment by mail to the taxpayer for the 2011, 2012 and 2013 tax years. Ie. THOSE BROWN ENVELOPES!

The taxpayer claimed he never received them, and that he only found out about them after retaining a tax accountant in late 2019. The accountant, who represented the taxpayer in court, filed an application on June 9, 2022 for a time extension to object to those reassessments.

The taxpayer’s argument was that he simply did not receive the notices of reassessment. He testified that CRA correspondence was “sporadic at best” but was unable to produce copies or records of any such correspondence.

The judge wondered whether the taxpayer had received any mail from the CRA and, if he did, when. He also wondered whether the taxpayer received any mail from other senders.

After confirming that the taxpayer’s address on file was correct and that, because he had objected to each of the reassessments, he must have received them, the judge said the taxpayer’s allegation “lacked any factual foundation, which is strange, particularly as the [taxpayer] himself is a mail carrier.”

The taxpayer’s notice of objection wasn’t filed until January 2017, well beyond the 90-day deadline. A week later, the CRA wrote to the taxpayer informing him that his notice of objection wasn’t valid, as it was late. The letter went on to say that the taxpayer had one year from the expiration of the 90-day period to apply to the CRA for a time extension to serve a notice of objection.

While the taxpayer did, ultimately, file an application with the CRA for an extension of time to object, he waited until May 2018 to do so, which was beyond the one-year extension period (which expired on Oct. 3, 2017).

As for the 2015 and 2016 tax years, the CRA says it sent notices of reassessment to the taxpayer via email in 2021 and 2020, respectively. The CRA sent those notices via email because on March 10, 2020, the taxpayer authorized the CRA to do so by enrolling in the CRA’s My Account system.

The Ruling?

The judge ruled that because the taxpayer failed to file applications for extensions by their respective deadlines, the Tax Court was unable to grant the extensions requested for all five years under reassessment. Thus, the taxpayer was effectively precluded from disputing any of those reassessments — a seemingly harsh result that demonstrates what can happen if you miss (or ignore) a CRA email.

All That to Say…

Pay attention to your email and to your physical mail! It’s easy to miss these or see it come through and think “oh, I’ll deal with that this weekend.” The CRA does not care. Unless you can somehow prove that the correspondence simply never reached you (hard to do), you are on the hook. Keep an eye out!

If you are sitting at your desk looking at a scary email or letter from the CRA, take action now and give us a call. We can set up a time to go over it together and help you through whatever it is the CRA wants from you.

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.