For any taxpayer that made an election pursuant to section 156 of the Excise Tax Act before January 1, 2015, the final deadline for filing Form RC 4616 is December 31, 2015. Until this year, there was never a requirement to file any documentation with the Canada Revenue Agency (the “CRA”) when making this election, but due to changes announced in the 2014 Federal Budget, the election is now available in more circumstances, but with these new filing requirements.
A GST/HST or income tax audit may result in an assessment that the taxpayer does not agree with. In this situation, it would be in the best interest of the taxpayer to object to a tax assessment by following these steps:
A tax audit on a specific subject can be short (an audit of the business promotional expenses and advertising) or if it is more general in nature, it can be longer (for example dealing with unreported income). During the audit stage, the taxpayer will be asked to provide documentary evidence, bank statements and explanations supporting his position in relation to the audited items. Many audits go well, however, some do not.
Generally, prior to the issuance of a notice of assessment following the audit, the auditor issues a draft assessment and invites the taxpayer to make representations prior to a predetermined date (usually 21 days). The taxpayer should take this opportunity to make representations explaining why he disagrees. It is preferable to make written representations and to submit any additional documents at this stage. It is wise to obtain professional assistance from an expert in the field to help with the representations during this period.
Following the representations on the draft assessment, it is possible that the Revenue agency (Quebec or Canada) will issue an assessment. Whether it is for income tax or GST/HST, this assessment carries interest at the prescribed rate starting on the day on the notice. Whether the taxpayer contests it or not, it is generally advisable to pay the amounts assessed in order to avoid an accumulation of interest. Furthermore, tax laws permit the imposition of costly penalties in certain circumstances, for example, gross negligence, which can form part of the assessment.