Can You Object to a CRA Penalty Such as a Late-Filing Penalty in Canada?

A notice of assessment arrives with a penalty on it, perhaps for filing late or for something CRA says was more serious. You want to know whether you can fight it and which route to choose.

There are two different routes: an objection, which challenges the assessment itself, and a request for relief, which asks CRA to cancel or waive an amount as a matter of fairness. This article explains how each works and how they differ.

This article covers Canadian federal tax law, which applies in every province.

Penalties are part of the assessment

When you file a return, the Minister examines it, assesses tax, interest and penalties, and sends a notice of assessment. Because penalties and interest are part of the assessment, a notice of objection can dispute them.

An objection is the right tool when you say the penalty was wrongly applied, for example because the facts do not match what CRA assumed. Whether your argument is strong depends on the facts and the specific penalty, which a lawyer or accountant can help assess.

Objection versus a relief request

Cancelling or waiving a penalty as a matter of fairness is a separate request, not an objection. The Minister may waive or cancel all or part of a penalty or interest for a taxation year, or on an application made, up to ten calendar years after the end of that year.

One important limit: a reassessment issued under the Taxpayer Relief provisions cannot itself be objected to.

Deadlines for objecting to a penalty

An individual (other than a trust) or graduated rate estate has until the later of one year after the filing-due date for the year and 90 days after the notice of assessment was sent. Corporations have 90 days. The count starts from the day the notice was sent, not the day you received it.

Some assessments carry only a 90-day limit even for individuals, including RRSP and TFSA over-contribution assessments and loss determinations.

If you miss the deadline, you may apply to the Minister for an extension, giving reasons for the delay. The application must be made within one year after the deadline expired, and you must meet the conditions in the Act. After that year, no extension can be granted.

What happens after you object

On receiving a notice of objection, the Minister must reconsider the assessment and vacate, confirm, vary or reassess it, then notify you in writing. If CRA disagrees, it sends a Notice of Confirmation or a reassessment, and you can appeal to the Tax Court of Canada within 90 days.

You can also appeal if 90 days pass after serving your objection with no decision. The Court has Informal and General procedures. Informal appeals have no filing fee, while General Procedure appeals have a fee based on the amount in dispute.

If you hold back information during an audit and give it only with your objection, the file may be sent back for a second review. Interest also continues to accrue on disputed tax during an objection, although paying the disputed amount stops further interest on what you pay.

What to do next

• Read the notice of assessment and identify the penalty, the tax year and the notice date.
• Work out your objection deadline from the date the notice was sent.
• Decide whether your argument is that the penalty is wrong (objection) or that fairness supports relief (separate request).
• Gather documents that explain what happened, such as dates, correspondence and records.
• Consider filing both an objection and a relief request if both apply, and confirm the approach with a lawyer or accountant.

Frequently asked questions