Check which document you are holding, because the cheapest stage is the one before the reassessment
A proposal letter and a notice of reassessment look alike and are legally different things. The proposal letter comes from the auditor, sets out the adjustments they intend to make and why, and gives you a stated window to respond with representations and documents. Nothing has been assessed, your balance has not changed, and no objection deadline is running. The notice of reassessment is the decision: it changes the balance, it carries the date the 90-day clock starts from, and it moves the file out of the auditor's hands.
Responding to the proposal is the cheapest stage for three reasons. The person reading your response built the adjustment, so a document that fills the gap they identified changes the number directly. There is no form, no queue and no waiting period. And anything you prove at this stage never becomes a reassessed balance carrying interest and a collection file.
The common mistake is to treat the proposal as a formality and save the argument for the objection. Appeals officers read the audit file, so a proposal answered with silence or a one-line disagreement hands them a file with nothing in it to reverse. If you are still inside the proposal window, the audit-stage playbook in what to do after receiving a CRA audit notice applies, and the rest of this page is about what happens if the number survives it.
The notice of objection: the form, the 90 days and the one-year extension
An objection is a formal written dispute filed with CRA's Appeals Branch, not a letter to the auditor. For income tax the form is T400A, although a signed letter or the formal dispute function in My Business Account does the same job provided it identifies the taxpayer, the year, the notice and the reasons. GST/HST reassessments have their own objection form and their own file, so a business reassessed for both income tax and HST files two objections in parallel, each on its own clock.
The deadline is 90 days from the date printed on the notice, not from the day the envelope arrived or the day someone read it. For a corporation that is the whole rule. Individuals disputing a personal return have an alternative measured from the return's filing due date that can run longer, but the safe habit is to treat every notice as a 90-day notice and put the date on the calendar the day it lands.
If the 90 days have passed, an extension is possible but never automatic. You apply within one year after the original deadline expired, and you have to show that during the 90 days you were unable to act or to instruct someone to act for you, or that you genuinely intended to object; that it would be fair to grant the extension; and that you applied as soon as circumstances allowed. Not realizing the deadline mattered fails that test, while a serious illness, a notice sent to a closed address or a professional who missed it can pass. Beyond that one-year outer limit there is no route back, and the reassessment stands whatever its merits.
What a good objection contains
A good objection is a short brief, not a complaint. It identifies the notice and the year, states each issue separately, gives the facts behind each one, points to the provision of the Act you rely on, and states the amount in dispute for each issue. That last item is not decoration, because the amount in dispute helps decide which collection rules apply now and which court procedure is available later.
- The facts, in order, with dates. Who did what, when, and why the transaction was what you say it was, written so that someone who has never met you can follow it.
- The documents, attached and labelled. Contracts, invoices, bank records, minutes and working papers. An objection that promises documents later is weaker than one that carries them.
- The provision. For each issue, which section or regulation the auditor applied, and why you say it applies differently or why a different provision governs.
- The number. For each issue, the reassessed amount, the amount you say is correct, and the difference.
- The relief requested. Vacate the reassessment, vary it to a stated figure, or reassess on a stated basis.
Two things do not belong in it. Complaints about how the audit was conducted do not move an appeals officer unless they affected the numbers. Neither does volume: three binders that bury the two documents deciding the issue slow the file and signal weakness. Ask for the auditor's working papers and report through the appeals officer or an access request, because the reasoning you are answering lives there, and it is often narrower than the proposal letter suggested.
The objection also fixes the record for everything that follows. Large corporations, as defined in the Act, are restricted to the issues and relief stated in their objection, and every taxpayer is better served by drafting as if that rule applied to them. Write it as if a judge will read it, because one might.
What happens to the money while you object
Objecting does not pause interest, and it only pauses collection for some taxes. That is the part owners most often get wrong, and it is different for each of the three taxes a business is likely to be reassessed on.
| What was reassessed | Collection while the objection is outstanding | Interest | Practical position |
|---|---|---|---|
| Corporate or personal income tax | Generally restricted on the disputed amount while a timely objection or Tax Court appeal is outstanding, with exceptions for large corporations, which must pay part of the disputed amount up front, and for amounts CRA considers at risk | Arrears interest continues on whatever is finally upheld | Pay the undisputed portion; treat the disputed portion as a cash-and-odds decision |
| Net GST/HST | Not restricted; CRA can collect the full reassessed amount while the objection proceeds | Continues | Expect collection contact; a payment arrangement or security usually runs alongside the objection |
| Payroll source deductions | Not restricted, and directors carry personal exposure for the shortfall | Continues | Pay first and dispute second, in almost every case |
Paying a disputed amount is not a concession. If the objection succeeds, the payment comes back with refund interest, and in the meantime it stops arrears interest on the paid portion. CRA's arrears rate sits several percentage points above its base prescribed rate, compounds daily and is not deductible, so on a long objection the interest can rival the tax. A business that can borrow at a deductible commercial rate is often better off paying under protest even with good odds of winning.
If the business cannot pay the reassessed balance at all, that is a separate problem with its own playbook, set out in what your options are when the business cannot pay CRA. Run the two tracks together: the objection on the merits, and the arrangement or security on the money, each with its own deadline and its own contact at CRA.
Appeals officer, settlement, Tax Court and when counsel comes in
The appeals officer decides the objection, and they are independent of the auditor. They read the audit file and your objection, may ask for more information or a meeting, and then confirm the reassessment, vary it or vacate it. Expect many months, and longer for a complex corporate file. You can add submissions while it is open, and it is worth doing so when new documents surface, because the officer's decision closes CRA's internal process.
Settlement at the appeals stage is real but constrained. CRA cannot split the difference for convenience; a settlement has to be defensible on the facts and the law, which in practice means issue-by-issue concessions rather than a percentage haircut. A settlement normally comes with a waiver of your right to object or appeal further on the settled issues, so the number you accept is the number you keep.
If the officer confirms the reassessment, or a set waiting period passes with no decision, the next step is an appeal to the Tax Court of Canada, on its own deadline measured from CRA's decision. The Court has two tracks. The informal procedure is available when the federal tax and penalties in dispute for each year sit under a set limit: relaxed rules of evidence, faster hearings, representation by an agent allowed, and no cost award against you in the ordinary case. The general procedure is full litigation, with pleadings, discovery, formal evidence and costs, and a corporation in it normally needs a lawyer.
Bring in tax counsel when the dollars justify the general procedure, when the issue is one of statutory interpretation rather than fact, when gross negligence penalties or anything with a criminal edge is on the file, or when privilege over advice matters. A CPA carries most files through the proposal, the objection and often the informal procedure. The handoff to counsel works best when the CPA who built the record stays on it, because the facts pleaded at the objection stage are the facts the Court will hear.
What changes the answer, and how we run a dispute
Six facts decide whether, and how far, to dispute a reassessment:
- Where you are in the process: proposal window still open, inside the 90 days, past it but inside the extension year, or beyond.
- Which tax was reassessed, because HST and payroll amounts are collectible during the dispute and income tax generally is not.
- The amount in dispute against the cost of disputing it, including the interest running on the disputed balance while the file waits.
- Whether the issue is fact or law: a missing document is an objection you can win on paper; an interpretive point may need counsel from the start.
- The quality of the record, since what was said and sent during the audit constrains every stage after it.
- Whether the same issue repeats in other years or other entities, which raises the stakes of getting the first decision right.
Our role inside CRA support is to get the sequence right: answer the proposal properly, file the objection on time with the record built for appeals, run the money decision in parallel, and know when to hand to counsel. Where the reassessment also carries penalties or interest that no objection can touch, the separate relief route in when CRA will cancel penalties and interest often runs alongside. If a notice has arrived and the date on it is close, a free 15-minute discovery call is enough to tell you which of the three windows you are in and what to file first.
Source: CRA — Complaints and disputes.
