Tax disputes in a COVID-19 world

First, if you’re under audit, things will take longer. However, the delay will not necessarily help you if the CRA is auditing a past year. For individuals and for most corporations that are small businesses, the CRA normally cannot reassess you more than 3 years after the original Notice of Assessment (though this does not apply in cases of carelessness, neglect or fraud, and there are other specific exceptions). So, for example, if you filed your 2017 income tax return in April 2018 and the CRA issued your Notice of Assessment on May 5, 2018, then once May 5, 2021 passes you would normally be (mostly) free from being reassessed. However, on May 19, 2020, the Department of Justice released draft legislation which will allow the Minister of National Revenue to extend this deadline by up to 6 months to account for the pandemic. By the time you read this, the legislation (Time Limits and Other Periods Act) may have been passed by Parliament, and the CRA may have its extension. So expect that the deadline in the above example will become November 5, 2021.

Nevertheless, with the backlog caused by COVID-19, if the CRA was planning to audit you, the audit could well be delayed to the point where the auditor is unable to reassess you in time.

Second, if you have filed a Notice of Objection, a CRA Appeals Officer will get to it eventually. Objections relating to benefits and credits were considered “critical”, and work on them continue during the pandemic. Others will be delayed, however.

If you are late in filing a Notice of Objection during the pandemic, don’t worry — unless you’re very late. Normally there is a 90-day deadline to file an objection. There is a one-year extension period, after the 90 days, during which you can file an Application for Extension of Time to Object and the CRA can choose to accept your late objection as validly filed. The CRA has announced that all objections due March 18, 2020 or later can be filed until June 30, 2020 — meaning that the objection will be automatically considered to include an Application for Extension of Time, so that the CRA can consider it. No doubt the CRA will also be flexible beyond this date, where the 90 days began running during the pandemic. But beware: if the one-year extension period expires, you cannot file an objection — the CRA is legally not permitted to accept it. So, if you were already past the 90-day deadline to file an objection before the pandemic, make very very sure that this one-year period doesn’t expire, or you lose your objection and appeal rights.

Similar rules apply to appeals to the Tax Court of Canada. The appeal deadline is 90 days after the CRA sends you its decision on your Notice of Objection. If you miss the deadline, the Tax Court has announced that, as long as you file your appeal within 60 days of the Court reopening, your appeal will be automatically considered to include an Application for Extension of Time to Appeal, so that the Tax Court can allow the Notice of Appeal to be considered filed on time. If you miss the 90-day deadline and also miss the one-year extension period beyond the 90 days, then you lose your appeal rights, but the proposed Time Limits and Other Periods Act announced on May 19, 2020 (discussed above) will extend this deadline for the pandemic period (the specific period of extension has not been finalized, but it can be for up to 6 months). Note you can file an appeal to the Tax Court online even when the Court is closed.