What Should You Do With That CRA Arbitrary Tax Assessment?

You may think that if you do not file your tax when due that the CRA is just going to ignore you until you do file. Then at that time they will come at you with penalties and fines. Some individuals will assume this, and determine to file their back taxes when they have enough money to meet all of their obligations. What can happen is though that the CRA decides to do an arbitrary tax assessment. In other words they will do your taxes for you based on past information and you can be sure that you are certainly not going to get any tax breaks if this happens.


The process that is most likely to take place if you are in tax arrears as the CRA will send you a letter of request. They perceive you as receiving this as a friendly reminder. It is a form letter. If you choose to ignore this then another letter will soon arrive on another form. Then if there is no response on your part you can expect to receive a third form letter by registered mail. You may have got the picture by now that the CRA means business and they are not going to go away.


If the tax department decides to arbitrarily do your taxes for you then you will receive an arbitrary assessment that now shows the amount of taxes that they believe you owe. You will then be responsible to either pay this bill or you will have the option to appeal it. What normally happens is many of the delinquent tax payers who now know they have no choice but to do their taxes will file an amended tax return that they have done themselves. Often this will trigger an audit by the CRA, so it had better be done right.


The best way to avoid all of this hassle is to utilize a Toronto accountant to prepare and file your tax returns even if you feel that you will owe taxes and cannot pay. You can then make arrangements with the tax department as to when you could pay the bill or make small installments. Even if you have been arbitrarily assessed make sure you use a good accountant to do your taxes properly. This way you will be able to withstand the scrutiny of a potential audit.


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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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