What To Do If You Receive a CRA Reassessment

Understanding CRA Reassessments

A Notice of Reassessment is an official document from the CRA that modifies your previously filed and assessed tax return. Unlike your original Notice of Assessment (which confirms what you filed), a reassessment changes the amounts, usually resulting in additional taxes owed.

Common Reasons for CRA Reassessments

The CRA may reassess your tax return for various reasons, including:

• Audit findings: After reviewing your records, the CRA discovered unreported income, disallowed deductions, or other discrepancies
• Third-party information: The CRA received T-slips or other reports from employers, financial institutions, or foreign governments showing income you didn't report
• Mathematical or clerical errors: Simple calculation mistakes on your return that result in tax owing
• Denied deductions or credits: The CRA determined you weren't eligible for certain tax deductions or credits you claimed
• Amended reporting requirements: Changes to tax law or CRA interpretation that affect your previously filed return
• Taxpayer-requested adjustments: You or your representative asked the CRA to review and adjust a previously assessed return

In 2025, the CRA has intensified scrutiny on several areas including cryptocurrency transactions, rental property income, foreign asset holdings, and work-from-home expense claims. If your reassessment relates to any of these areas, it's particularly important to seek professional guidance from a tax lawyer.

Critical Deadlines You Cannot Miss

Time is of the essence when dealing with a CRA reassessment. Canadian tax law imposes strict deadlines that, if missed, can eliminate your right to dispute the assessment.

Payment Obligations During Dispute

A critical point many taxpayers misunderstand: filing an objection does NOT stop the CRA from collecting the assessed amount. Interest continues to accumulate on any balance owing, even while your objection is being reviewed.

However, the CRA may agree to hold collection action if you can demonstrate financial hardship or if there's a reasonable likelihood your objection will succeed. This requires strategic negotiation, which is where legal representation becomes invaluable.

Step-by-Step: How to Respond to a CRA Reassessment

Step 1: Review the Reassessment Carefully

When you receive a Notice of Reassessment, don't panic—but don't ignore it either. Take time to thoroughly review the document:

• Identify what specific changes the CRA made to your return
• Note the amounts of additional tax, interest, and penalties assessed
• Look for the CRA's explanation of why they made these changes
• Check the date on the notice to calculate your 90-day objection deadline
• Review the "statement of account" section showing your new balance

Step 2: Gather Supporting Documentation

Before deciding whether to accept or dispute the reassessment, collect all relevant documentation:

• Your original tax return and all supporting receipts, invoices, and records
• T-slips (T4, T5, T3, etc.) from all sources of income
• Bank statements and financial records
• Correspondence with the CRA about this tax year
• Any audit documents or information requests from the CRA

Step 3: Assess Whether the Reassessment is Correct

With your documents in hand, evaluate the merits of the CRA's position:

• Is the reassessment based on accurate facts and correct application of tax law?
• Did you make an error on your return, or did the CRA make an error in their reassessment?
• Do you have documentation to support your original position?
• Are there valid legal arguments against the CRA's interpretation?

This evaluation often requires professional expertise. A tax lawyer in Toronto can provide an objective assessment of your case's strength and advise on the best course of action.

Step 4: Decide on Your Response Strategy

You have several options when responding to a reassessment:

Step 5: File Your Notice of Objection

If you choose to object, you must do so in writing. Your Notice of Objection should include:

• Your name, address, and social insurance number (or business number)
• The tax year(s) you're objecting to
• A clear statement of the facts
• The specific reasons why you disagree with the reassessment
• All relevant supporting documents
• The relief you're seeking (what you want the outcome to be)

You can file objections through:

• My Account or My Business Account (online): The fastest method
• By mail: Send to the Chief of Appeals at your Tax Services Office
• Through a tax professional: Many people have their lawyer or accountant file on their behalf

What Happens After You File an Objection?

The Appeals Process

Once the CRA receives your Notice of Objection, it's assigned to an Appeals officer—a different person from the auditor who issued the reassessment. This independent review is designed to provide a fresh, unbiased look at your case.

The timeline for objections varies widely:

• Simple cases: May be resolved in 3-6 months
• Complex cases: Can take 12-18 months or longer
• Cases requiring additional information: Timeline depends on how quickly both parties provide requested documents

Possible Outcomes

After reviewing your objection, the Appeals officer can:

• Allow your objection in full: The reassessment is reversed, and you're returned to your original assessment
• Allow your objection in part: Some of your arguments succeed, reducing the amount owing but not eliminating it entirely
• Deny your objection: The reassessment stands as issued
• Vary the assessment: The Appeals officer may find additional issues, potentially increasing or decreasing the amount owing

If Your Objection is Denied

If the Appeals Division confirms or partially confirms the reassessment, you have the right to appeal to the Tax Court of Canada. You must file your appeal within 90 days of receiving the Confirmation or Reassessment from Appeals.

Tax Court proceedings are formal legal processes. At this stage, having experienced legal representation becomes even more critical. Tax lawyers can present evidence, cross-examine CRA witnesses, and make compelling legal arguments before a judge.

When to Hire a Tax Lawyer for Your CRA Dispute

While not every reassessment requires legal representation, certain situations strongly warrant hiring a tax lawyer:

• The reassessed amount is substantial (typically $25,000 or more)
• The reassessment involves complex tax issues such as international transactions, corporate structures, or technical interpretations of tax law
• You're facing gross negligence penalties which can be 50% of the understated tax
• You disagree with the CRA's position and believe you have strong grounds for appeal
• The CRA has denied your objection and you need representation at Tax Court
• You're overwhelmed by the process and need someone to handle communications and strategy
• Your financial situation makes payment difficult and you need to negotiate payment arrangements or explore taxpayer relief

A tax lawyer brings several advantages to your CRA dispute:

• Solicitor-client privilege: Your communications are legally protected
• Legal expertise: In-depth knowledge of tax law, case precedents, and CRA procedures
• Strategic approach: Experience determining which arguments will succeed and which won't
• Negotiation skills: Ability to negotiate favorable settlements with CRA Appeals
• Court representation: If needed, lawyers can represent you at Tax Court (accountants cannot)

Common Questions About CRA Reassessments

Protecting Your Rights and Achieving Fair Outcomes

A CRA reassessment doesn't have to be the final word on your tax situation. With the right approach, strong documentation, and professional legal support, many reassessments can be successfully challenged or reduced.

The key is acting quickly, understanding your rights, and seeking expert guidance when the stakes are high. Don't let the 90-day deadline pass without taking action. Whether you ultimately accept the reassessment, negotiate an adjustment, or fight it through to Tax Court, making informed decisions with professional support gives you the best chance of a favorable outcome.

Remember, the CRA makes mistakes too. Reassessments are not infallible, and you have every right to challenge assessments you believe are unfair or incorrect. With experienced legal representation, you can navigate the dispute process confidently and protect your financial interests.