Can You Object to CRA Penalties and Interest in Canada?

If your assessment includes a penalty, such as one for filing late or one tied to what you reported, you may wonder whether you can dispute it or only ask for mercy. In fact there are two different routes, and they work differently.

This article explains the difference between objecting and asking for relief, the deadlines that apply, and what happens to interest and collection while you wait. Which penalty applies to you depends on your facts, so a lawyer or accountant can confirm.

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

Penalties and interest are part of the assessment

When the Minister examines a return, the assessment covers tax, interest and penalties. The CRA confirms that penalties and interest are part of the assessment and that a notice of objection can dispute them.

An objection is the route when you say the penalty or interest was wrongly calculated or should not have been assessed on the facts. Your notice must set out the reasons and all relevant facts.

Objecting versus asking for relief

Cancelling or waiving a penalty or interest as a matter of fairness is a separate request, not an objection. Under the Act, 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. The Minister may make any assessment needed to give effect to it despite the normal reassessment limits.

Deadlines if you choose to object

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. A corporation has 90 days. The clock runs from the date the notice was sent, not received.

If you miss the deadline, you may apply to the Minister for an extension, giving reasons for the delay, addressed to the Chief of Appeals with a copy of the notice of objection. The application must be made within one year after the objection deadline expired, and you must show you were unable to act or had a genuine intention to object, that an extension is just and equitable, and that you applied as soon as circumstances allowed. After more than one year, no extension can be granted.

Interest and collection while you dispute

• Generally, you do not have to pay disputed income tax until the objection review is complete.
• Interest keeps accruing, but paying all or part of the disputed amount stops further interest on the amount paid; it is refunded if the CRA agrees with you.
• After an objection is served, the Minister cannot take collection action on the disputed amount until 90 days after the decision is sent.
• These restrictions do not apply to assessments under ss.152(4.2), 169(3) or 220(3.1), or to amounts that must be withheld and remitted.

If the CRA disagrees, it sends a Notice of Confirmation or a reassessment, and you can appeal to the Tax Court within 90 days.

What to do next

• Read the assessment to see which penalties and how much interest were charged.
• Decide whether you dispute the penalty itself, or accept it and want it forgiven for fairness reasons.
• If you dispute it, calendar the objection deadline from the notice date.
• If you want relief, gather evidence of the circumstances and keep the ten-calendar-year limit in mind.
• Consider paying part or all of the amount to limit interest.
• Talk with a lawyer or accountant about whether to do one or both.

Frequently asked questions