A Missed Tax Deadline, and the Accountant Who Owned It

The situation

Kwame had run his construction company out of Sudbury for close to fifteen years, growing it from a two-truck outfit into a business that regularly carried project backlogs worth several million dollars. He and his spouse Hodan, a specialist physician, kept their finances straightforward: Kwame ran the company, Hodan ran her practice, and a long-standing accountant, Amina, handled both sets of books, including the company's annual corporate tax filings.

In the spring, the Canada Revenue Agency reassessed the company's tax filings for two earlier fiscal years, disallowing a set of expense deductions the accountant had claimed on the company's behalf. The reassessment added up to roughly $1.05 million in additional tax owing, once interest was included. Kwame was rattled but not panicked. Canada's tax rules allow a taxpayer who disagrees with a reassessment to file a formal Notice of Objection, triggering an internal CRA review of the disputed items before anything is owed for certain. He instructed Amina to prepare and file one. He assumed, reasonably, that it had been done.

The disallowed deductions were mostly equipment and subcontractor costs the CRA auditor felt were not adequately documented at the time of filing — the kind of dispute that comes down to paperwork and characterization rather than anything improper. Kwame's own view, shared by people who knew the business, was that the expenses were legitimate and that a properly argued objection had a real chance of success. What he could not have anticipated was that the chance to make that argument would disappear before anyone told him it was in danger.

Once the missed deadline came to light, the company's regular banking relationship also became strained. The construction company carried a line of credit tied to annual financial reviews, and a $1.05 million contingent liability sitting on the books unresolved was enough to prompt questions from the lender well before any lawsuit was filed.

By the time Kwame instructed us, the company had roughly six months of breathing room before its next bank review, which shaped how quickly we needed to move.

What we found

It had not been done — not on time, at least. A Notice of Objection has to be filed within a strict window after the reassessment is issued, and once that window closes, the ordinary right to object is lost. Amina, juggling a heavy tax season and, it emerged, a backlog of client files, filed the objection several weeks after the deadline had passed. CRA rejected it outright as late, with no discretion left to consider its merits through the normal channel.

Kwame came to Treadstone Law after the rejection letter arrived, when the company was suddenly staring down the full $1.05 million with essentially no formal avenue left to contest it. Our first task was not to relitigate the tax dispute itself — that window had closed — but to assess whether Amina's missed deadline was professional negligence, and if so, what that negligence had actually cost.

That second question mattered more than it might sound. A professional negligence claim against an accountant is not just about proving a mistake happened. It requires showing that the mistake caused a real loss — which meant we had to reconstruct, after the fact, how strong the underlying objection would have been if it had been filed on time. We retained an independent chartered professional accountant to review the original expense claims CRA had disallowed. Their opinion was that a properly documented objection had a strong chance of succeeding on most of the disputed items, which would likely have reduced the reassessment from about $1.05 million down to somewhere in the range of $200,000 to $300,000. In other words, the missed deadline had not created the tax dispute — but it had likely cost the company the chance to resolve it favourably, to the tune of roughly $800,000.

What we did

1. Confirmed the retainer and the duty it created. Amina had been formally engaged, in writing, to prepare and file the objection. That engagement created a professional duty to file it correctly and on time — the foundation any negligence claim has to establish before anything else.
2. Built the loss-of-a-chance case. Because the underlying tax dispute could no longer be argued through the normal objection process, we could not simply prove Kwame's company was entitled to a specific refund. Instead, we built the case around what Ontario courts call a lost opportunity: the value of the chance to succeed on objection that the missed deadline had taken away. The independent accounting opinion was the backbone of that argument, translating a missed filing date into a concrete dollar figure.
3. Sent a detailed letter before litigation. Before filing a claim, we set out the retainer, the missed deadline, the independent accounting opinion, and the resulting loss in a formal letter to Amina and her professional liability insurer. Most accountants in Ontario carry mandatory professional liability insurance through their governing body, and insurers generally prefer to resolve a well-documented claim rather than litigate it.
4. Filed a Superior Court claim to preserve the deadline. The insurer's initial response was slow, and Ontario's Limitations Act, 2002 sets a strict window for starting a claim after the loss becomes known. Rather than let settlement talks drift past that window, we issued a formal claim in the Superior Court for professional negligence, which stopped the clock and gave us leverage while negotiations continued in parallel.
5. Negotiated from a position of documented strength. With the independent accounting opinion, the engagement letter, and a filed claim all in hand, we pushed for a settlement that reflected the full value of the lost objection rather than a discounted nuisance payment. Amina's insurer, facing a well-evidenced claim, engaged seriously within a few months.

The outcome

The claim settled before trial for an amount close to $800,000 — reflecting the independent accountant's estimate of what the objection would likely have saved the company had it been filed on time, less a modest discount for the litigation risk both sides carried. The settlement came from Amina's professional liability insurer, and Kwame's construction company used it to cover the CRA reassessment in full without drawing down its own working capital or touching Hodan's practice income.

The case took a little over a year from the first meeting to settlement — slower than Kwame had hoped, but realistic for a claim that turned on reconstructing a hypothetical tax outcome rather than a straightforward dollar dispute. The independent accounting opinion did the heaviest lifting: without a credible, professionally prepared estimate of what the objection would have achieved, the negligence claim would have had a clear breach of duty but no persuasive number attached to it, and insurers rarely settle strongly on liability alone.

For Kwame, the result closed a chapter that had briefly threatened the company's bonding capacity — construction companies bidding on larger contracts often need to show lenders and bonding companies a clean balance sheet, and a seven-figure tax liability sitting unresolved on the books would have made that difficult heading into the next bidding season.

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