Imagine this: One fine day, your favourite client enters your office and hands you a tax assessment he found in pile on his desk after returning from vacation. Upon close examination of the date, you realize that the time for issuing a Notice of Objection has expired. Suddenly, you are faced with the problem of filing a late appeal. Besides demoting your client to your less-than-favourite list, what do you do?
Most of us are familiar with the deadlines involved for objecting to an assessment, but let’s go over them again for good measure: An individual taxpayer must file an objection on or before the later of 90 days from the date of the assessment and one year after the balance due date of the taxpayer for the year. For a corporation or a trust, only the 90-day limit applies.
If the deadline is missed, the first step is to request an extension of time from the Minister of Revenue. This would consist of a letter addressed to the Chief of Appeals in a District Office or Taxation Centre, outlining the facts and reasons why the extension should be granted. You must also enclose the actual proposed Notice of Objection that the taxpayer wishes to file. The request for extension must be made within one year from the time the objection was otherwise due.
To be successful, the taxpayer must show that he was unable to act or to instruct another to act on his behalf within the relevant time period, or he must prove that he had a bona fide intention to object to the assessment within the normal time period. He must also show that the application was made as soon as the circumstances permitted, and that it would be just and equitable for the Minister to grant the extension.
The time periods involved can be a bit confusing. For example, in one case, the taxpayer’s lawyer failed to file a Notice of Objection on time. When he realized his mistake, rather than sending in his request for extension as soon as the circumstances permitted, he waited almost one year, because he thought that he had this amount of time to make the request under the rules described above. His request was denied, due to his misinterpretation of the law.
Should 90 days expire after making a request to the Minster without a response, or if the request for extension is denied, the next step is to request the extension from the Tax Court of Canada. This application must be filed within 90 days following a refusal of the application (if any) by the Minister. The taxpayer must send three copies of: (a) the request made to the Minister, (b) the proposed Notice of Objection, and (c) the Minister’s Notice of Refusal (if any) to the Registry of the Tax Court of Canada. It is also advisable to include a covering letter briefly explaining the facts and reasons for the request.
The Tax Court has the power to grant the application only where the first application was made with the Minister of Revenue within the one-year time period discussed earlier. The criteria used to determine whether the request will be granted are basically the same as those set out above. The only difference here is that the review will be made by the Tax Court, which is a body independent of Revenue Canada.
The Tax Court will, after receiving the application, fix a date for a hearing under the Informal Procedure Rules. This means that a taxpayer may be represented by an agent (such as an accountant) other than a lawyer.
Finally, we come to the question everyone is asking (I can hear you all now): What are the circumstances under which an extension of time will be granted? The case books are filled with some very interesting tales. For the answers, you are invited to wait by your laptops for the next edition of The Tax Issue.