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Jim Maroney

:: It's easy to dismiss a Notice of Assessment as just another useless piece of paper

::Maroney on Money for May 11, 2002

Unless you’re self-employed, April 30 was the deadline for filing your personal income tax return. If you filed your return electronically there’s a good chance you’ve already received your Notice of Assessment – paper filers may have to wait a little longer to receive notice from CCRA.

It’s easy to dismiss a Notice of Assessment as just another useless piece of paper worthy of your round filing cabinet but doing so could cause you big trouble down the road.

At its most basic level, a Notice of Assessment (Assessment) is simply acknowledgement that Canada Customs and Revenue Agency (CCRA) received the return you filed. This fact alone itself makes this paper worth keeping.

On a slightly higher level, an Assessment tells a taxpayer how good they’ve been at following instructions and using their calculator. CCRA conducts a computer check of the mathematical accuracy of the tax return you filed making adjustments as necessary. For taxpayers submitting computer generated tax returns there usually aren’t many corrections made at the assessment stage. For manually prepared returns, errors are more numerous and Assessments will reflect whatever adjustments are required (typically CPP, EI, the calculation of income tax and RRSP deductions).

Any corrections that are made will be explained, not surprisingly, in the “explanation of changes and other important information”. The explanations provided in this section are often terse, almost cryptic, relying heavily on tax lingo frequently leaving taxpayers further confused.

For example, on 2001 Assessments, I notice that the explanation now includes the “net” capital loss amount (i.e., after adjusting for the 50 per cent inclusion rate for capital gains and losses) but no indication of the year of origin. Furthermore, if you suffered a capital loss in 2001 and filed the required form T1A to carry the loss back to one of the three preceding years, the explanation will still highlight the fact you incurred a capital loss advising that the amount can be applied to reduce capital gains of other years (but wasn’t that why you filed form T1A?). Oddly enough, you’ll have to read the second paragraph before to find acknowledgement that CCRA has indeed received your loss carry-back request and that you can expect a Reassessment at a later date. Wouldn’t it make more sense to acknowledge the capital loss first and then the request to carry such amount back to a prior year rather than the other way around? Better yet how about doing so in one sentence rather than two seemingly unconnected paragraphs?

The “other important information” often records information that is anything but important. For example, there’s a statement indicating how you answered the question in the Elections Canada section of your tax return – a question that has absolutely nothing to do with your tax return and a dubious connection to government efficiency. There’s also a plug by CCRA to encourage taxpayers to make use of direct deposit as a “safe, convenient, dependable and timesaving way to get your income tax refund” – the time saving is probably a couple of days at most. Then there’s a pledge to improve programs and services, a reference to the general enquiry phone number and some sage advice to look in the phone book if you need to contact another area of CCRA – hey good thinking – I’d have never thought of that on my own!

On the more useful side, your Assessment provides information regarding how much you can contribute to your 2002 RRSP. You’ll also find a notation of the amount you contributed to your RRSP in 2001 or prior years that you have not deducted. Provided you have the RRSP contribution room, this amount can be used as part of your 2002 RRSP contribution. It’s a good idea to keep this information handy for reference before making next year’s RRSP contribution if you want to avoid potential penalties for over-contributing to your retirement fund.

On the truly important side you’ll find the date of the Assessment in the upper-left hand corner – yes, that’s right – the date. What’s the big deal with the date you say?

For starters, CCRA is free to reassess your return at any time up to three years from the date shown on your Assessment. However, if fraud or misrepresentation is your game, the three-year limit doesn’t apply and all prior year returns are open for reassessment.

Secondly, the date on your Assessment is relevant if you owed tax when your return was filed. If you have not yet paid the amount due, you have 90 days from the date on your Assessment to pay the amount before CCRA can commence collection proceedings.

Finally, and perhaps most importantly, the date on the Assessment determines how long you have to file a Notice of Objection if you disagree with CCRA’s assessment. If, after discussions with CCRA, you feel that your tax return has been improperly assessed, you have until the later of 90 days from the date on the Assessment and one year from the due date of the return to file an Objection. I’ll discuss this topic in more detail in an upcoming article.

Your Assessment is more than just another useless piece of paper - keep it with the related tax return and don’t forget where you stored it. At the very least, you’ll need to refer to it nine or ten months from now when the 2002 RRSP season arrives.

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Free Tax Advice Article Submitted to Income Tax Canada.net exclusively by Jim Maroney
CA Canadian Chartered Accountant with Brown, Andrews & Maroney in Maple Ridge, BC, Canada

Official details about this and other topics on income taxes can be found in English & Francais at www.ccra-adrc.gc.ca
Canada Revenue Agency (CRA) / l'Agence du revenu du Canada (ARC) offers bilingual information on its website for
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