by Matthew Pollock

by Jason Rosen

CRA ArticlesDecember 6, 20241 comment

CRA Notice of Reassessment: What It Means and How to Respond

Receiving a Canada Revenue Agency (CRA) Notice of Reassessment can be an unsettling experience. Whether it arrives unexpectedly or in response to a tax return you filed, it’s essential to understand what this notice means and how to handle it effectively. This article will guide you through the implications of a CRA Notice of Reassessment and provide steps to take if you receive one, ensuring you’re well-prepared to protect your financial interests.

What is a CRA Notice of Reassessment?

A CRA Notice of Reassessment is an official statement from the Canada Revenue Agency indicating changes made to your tax return after its initial assessment. This notice may confirm that you owe additional taxes, are entitled to a refund, or that there are adjustments to credits and deductions claimed on your return.

The reassessment process typically begins when the CRA reviews your tax return more thoroughly after its initial processing. This deeper examination may involve verifying income, deductions, or credits that you reported, and it can occur for various reasons, such as discrepancies flagged by the CRA’s system or random checks.

Common Reasons for Receiving a Notice of Reassessment

Understanding why the CRA might issue a Notice of Reassessment can help you take the appropriate steps to address it. Common reasons include:

1. Unreported Income: The CRA may discover income that was not included on your original tax return. This can happen if the CRA receives information slips (like T4s) that don’t match your reported income.
2. Incorrect Deductions or Credits: If the CRA believes that deductions or credits claimed on your return are incorrect or ineligible, they may reassess your return to adjust or disallow these amounts.
3. Clerical Errors: Simple mistakes in entering numbers, such as transposing digits or miscalculating totals, can lead to reassessment.
4. New Information: If the CRA receives new information after you filed your return, such as an amended slip from an employer, they might reassess your return based on this updated data.
5. Random Review: Sometimes, the CRA conducts random reviews to ensure tax returns are accurate and complete. Even if you haven’t made any mistakes, your return might be reassessed.

Steps to Take if You Receive a Notice of Reassessment

Receiving a Notice of Reassessment can be daunting, but it’s important to take a calm, systematic approach to address the situation. Here’s what you should do:

1. Review the Notice Carefully: The first step is to thoroughly review the Notice of Reassessment. Compare it to your original tax return to understand the specific changes the CRA has made. The notice will outline the reasons for reassessment and the new tax amounts owed or refunded.
2. Gather Documentation: If the reassessment is based on unreported income or disallowed deductions, gather all relevant documentation to verify your original claims. This might include income slips, receipts for deductions, or any correspondence with the CRA.
3. Consider the CRA’s Reasoning: Understand why the CRA made the changes. Sometimes, the reasons may be straightforward, such as a simple error on your part. Other times, the CRA may have interpreted the information or law differently than you intended.
4. Agree or Disagree with the Reassessment:
   • If You Agree: If, after reviewing the reassessment, you believe the CRA’s adjustments are correct, you can accept the changes. If you owe additional taxes, ensure you pay the amount by the due date to avoid interest charges.
   • If You Disagree: If you believe the CRA has made an error, you have the right to dispute the reassessment. You can file a formal objection by submitting a Notice of Objection (Form T400A) within 90 days of the date on the Notice of Reassessment.
5. Seek Professional Help: If you’re unsure about the reassessment or need assistance with filing an objection, it’s advisable to consult with a tax professional or lawyer. They can help you navigate the process, gather necessary evidence, and represent you in discussions with the CRA.

The Importance of Timely Action

Time is of the essence when dealing with a Notice of Reassessment. If you wish to dispute the CRA’s findings, you must file an objection within 90 days of receiving the notice. Missing this deadline can limit your options and may result in having to pay the assessed taxes, even if you believe they are incorrect.

In addition, any amounts owing must be paid by the due date specified in the notice to avoid interest charges. Even if you intend to dispute the reassessment, paying the amount due can prevent further financial penalties while you resolve the issue.

Conclusion

Receiving a CRA Notice of Reassessment can be a stressful experience, but understanding the process and taking prompt, informed action can help you manage the situation effectively. Whether you agree with the CRA’s reassessment or believe an error has been made, it’s crucial to address the notice promptly to avoid additional penalties or interest charges.

For personalized assistance and expert advice on responding to a CRA Notice of Reassessment, schedule a free consultation with Rosen & Associates Tax Law. Our experienced team can help you navigate the complexities of tax law, represent your interests, and ensure that your tax matters are resolved efficiently and effectively. Don’t leave your financial future to chance—get the professional support you need to protect your rights and assets.