With the April 30 general tax filing deadline less than a week away, the Canada Revenue Agency’s latest publicly available data (as of April 19) shows that the agency has already processed 15.2 million 2020 personal tax returns, which is about 52 per cent of the total number of returns it expects to receive this tax season (based on the total number of returns filed for 2019).
If you’re one of those Canadians who has already filed and received your Notice of Assessment, you should take a moment to ensure that your return was assessed as filed. This week alone, I’ve heard from a couple of readers who noticed discrepancies between what they filed and what the CRA has assessed. In one case, an individual started to receive their Old Age Security pension in 2020, but decided to cancel it (within six months) by repaying it, yet they were still assessed tax by the CRA on the OAS that was repaid. In a second case, a taxpayer was assessed Canada Pension Plan contributions on self-employment income in 2020, despite being over 65 years of age and electing to stop contributing.
If you disagree with the way the taxman has assessed your return, you have the right to formally object to your assessment by sending a Notice of Objection to the CRA, which will either result in a reassessment, a confirmation or a redetermination (in the case of a tax loss). If you still don’t agree with the CRA’s decision after you have received their explanations about their decision on your objection, you can appeal to the Tax Court of Canada. Generally, you have 90 days from the date of the CRA’s notice of confirmation, notice of reassessment or notice of redetermination to appeal. Alternatively, you can also appeal to the Tax Court if the CRA fails to issue a decision within 90 days from the date you filed your income-tax objection.
But, going to court can be expensive — and even more so, if you’re ultimately unsuccessful. “Parties who are involved in tax disputes in either the Tax Court or Federal Court of Appeal … always have to be wary that if they lose, they could be hit with costs,” cautions Ed Kroft, the head of the tax litigation and dispute resolution practice at Bennett Jones in Vancouver.
If you disagree with the amount of costs that were assessed, you can always ask the court to review those costs. This is what happened in a decision of the Federal Court of Appeal (FCA) released this week. But before we get to the decision on costs, we’ll go back to the initial 2016 Tax Court hearing.
Tax Court
The taxpayer’s original dispute dates back to the 2003 and 2004 tax years for which he was reassessed in 2009. He disagreed with the reassessments and wanted to appeal those reassessments to the Tax Court. He brought his appeal in 2016, which was too late, and the Crown brought a motion to quash his appeal.
In Tax Court, the taxpayer attempted to argue that the CRA never mailed a Notice of Confirmation to him and thus, he was still entitled to appeal to the Tax Court since 90 days had passed and his objection was still outstanding.
Based on the evidence, however, the Tax Court judge ruled that the taxpayer did, indeed, receive a Notice of Confirmation, which was dated Oct. 29, 2009 and, therefore, the 90-day deadline for him to appeal the confirmation expired on January 27, 2010. Since he only filed his Notice of Appeal on March 14, 2016, it was simply too late for him to appeal the 2003 and 2004 tax years. The Crown was awarded costs.
Federal Court of Appeal
In December 2017, the taxpayer appealed the Tax Court’s decision to the FCA, but in the appellate court’s view, the lower court “made no palpable and overriding error of fact or mixed fact and law, and no error of law.” As a result, it upheld the Tax Court’s finding that it was simply too late for the taxpayer to appeal. It awarded a second set of costs to the Crown.
Review of costs
Fast forward to February 2020, when the taxpayer was presented with a bill of costs totalling $2,450 for “assessable services,” and $347.23 for “disbursements” relating to his December 2017 FCA appeal. The taxpayer, presumably unhappy with the bill, asked the FCA to formally review the costs. The review of costs is conducted by an assessment officer of the FCA.
In most cases, the costs associated with an appeal to the FCA are assessed according to a tariff schedule (Tariff B). The schedule effectively limits the number of hours that can be charged for each assessable service, which include things like: preparation for examination, attendance at pre-trial conferences, attendance in court on the day(s) of the trial, as well as a variety of other services. The current hourly rate is fixed at $150 per hour as of April 1, 2021.
The taxpayer, in appealing the assessment of costs, did not file any responding material related to his request for a review of costs, effectively leaving the government’s bill “substantially unopposed.”
The assessment officer concluded that the assessable services claimed by the government totalling $2,450 were reasonable in the circumstances. He then reviewed the “disbursements” claim of $347.54, where he did find that the taxpayer was inappropriately charged for making three copies of the Appeal Book and the three copies of taxpayer’s Memorandum of Fact and Law, when only one copy of each should have been charged to the taxpayer. He thus lowered the Crown’s claim for photocopying by $47.31, bringing the total allowed claim for disbursements down to $300.23.
Combined with $2,450 of reasonable services, the bill to the taxpayer for the FCA appeal alone was $2,750.23. Add to this his own legal costs for two court appearances, the costs awarded to the Crown in Tax Court, not to mention any tax, interest and penalties charged for the 2003 and 2004 tax years, and it makes one think twice (or, in this case, thrice) before taking on the taxman.