Year-End Planning: Reviewing Taxpayer Rights On Appeal

The Auditor General for Canada has recently issued a report on CRA’s appeal process, focusing on whether CRA has been efficient in managing income tax objections. It’s important, says the report, because taxpayers have the right to impartial and timely review of their tax returns in order to avoid significant costs in time and resources when they disagree with CRA.

The overall findings were interesting:

  1. The report found that CRA took too long to process income tax objectives, contributing to a large backlog of objectives and was faulty in its measurement of performance results.
  2. The report referred to the Agency’s Taxpayer Bill of Rights (see below), which enshrines rights to a formal review, appeal and timely information. Taxpayers will incur high interest costs over a period of years when CRA is inefficient in the appeals process.
  3. The report recommended that CRA take all steps necessary to measure and report on the time required to process an objection so that taxpayers can better manage cost-benefit ratios when it comes to decision-making on objections and appeals.

CRA has enshrined sixteen basic rights that Canadian taxpayers have in their relationship with their tax department, and five specific commitments to small business. How many of them do you know? How many could you explain in a year-end conversation with a concerned taxpayer?

If you need a review, consider the following from CRA, which includes the right that taxpayers may arrange their affairs within the framework of the law to pay only the correct amount of tax, and if there are any taxes in dispute, that no income tax amounts are payable until an impartial review is provided. Reviewing this bill of rights with your clients may just open up some additional tax planning opportunities before this year is out.

Taxpayer Bill of Rights

  1. You have the right to receive entitlements and to pay no more and no less than what is required by law.
  2. You have the right to service in both official languages.
  3. You have the right to privacy and confidentiality.
  4. You have the right to a formal review and a subsequent appeal.
  5. You have the right to be treated professionally, courteously, and fairly.
  6. You have the right to complete, accurate, clear, and timely information.
  7. You have the right, unless otherwise provided by law, not to pay income tax amounts in dispute before you have had an impartial review.
  8. You have the right to have the law applied consistently.
  9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.
  10. You have the right to have the costs of compliance taken into account when administering tax legislation.
  11. You have the right to expect us to be accountable.
  12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
  13. You have the right to expect us to publish our service standards and report annually.
  14. You have the right to expect us to warn you about questionable tax schemes in a timely manner.
  15. You have the right to be represented by a person of your choice.
  16. You have the right to lodge a service complaint and request a formal review without fear of reprisal.

Commitment to Small Business

  1. The Canada Revenue Agency (CRA) is committed to administering the tax system in a way that minimizes the costs of compliance for small businesses.
  2. The CRA is committed to working with all governments to streamline service, minimize cost, and reduce the compliance burden.
  3. The CRA is committed to providing service offerings that meet the needs of small businesses.
  4. The CRA is committed to conducting outreach activities that help small businesses comply with the legislation we administer.
  5. The CRA is committed to explaining how we conduct our business with small businesses.

These rights are an important component of any year-end tax planning discussion, especially with new clients. First, full disclosure between advisor and client can help to determine how to approach a tax problem. Next, deciding how and when to appeal for review is important.

Remember that adjustments for errors or omissions can also be made, generally for a period of up to 10 years. That means that the 2006 tax year is still available for adjustment, but only between now and December 31; after that it is closed forever to requests for refunds, or the claiming of losses, RRSP room or other carry-forward amounts. Don’t miss out on the last chance, and only for a few more weeks, to make needed adjustments as far back as 2006.

Evelyn Jacks is President of Knowledge Bureau, Canada’s leading educator in the tax and financial services, and author of 52 books on family tax preparation and planning.

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