Have you ever “borrowed” money from your own company or paid a personal expense out of the corporate account? It might seem harmless, but the Canada Revenue Agency (CRA) has a special rule to catch this activity: subsection 15(2) of the Income Tax Act (Canada). This rule can turn those shareholder loans or benefits into taxable income. In this article, we’ll break down what subsection 15(2) is, why the CRA uses it so often, examples of how it can be triggered, how serious the consequences can be, and practical ways to avoid or defend against these tax assessments.

What is Subsection 15(2) of the Income Tax Act (Canada)?

Subsection 15(2) is often called the “shareholder loan rule.” In general terms, if you (or someone connected to you) get a loan or owe a debt to your own corporation because you’re a shareholder, that amount can be treated as income on your personal tax return. In other words, the CRA may insist you pay tax on money your company lent you, just as if it were a salary or dividend payment. This prevents owners from pulling money out of a company tax-free by calling it a loan instead of income. Essentially, subsection 15(2) stops “hidden” benefits or dividends from flowing to shareholders without tax consequences.

There are exceptions in the law for genuine loans. For example, if the loan is repaid quickly or made for specific purposes, it might not be taxed. The default assumption is that a loan to a shareholder is a taxable benefit unless there is an exception.

Why Does the CRA Use Subsection 15(2) So Often?

The CRA commonly relies on this rule because without it, everyone could try to avoid taxes by taking money out of their company as “loans” instead of taxable income. The rule is an anti-avoidance measure: it’s there to catch situations where a shareholder is really enjoying corporate funds (for personal use) without paying the proper taxes.

In practice, CRA auditors pay close attention to shareholder transactions. It’s very common for small business owners to withdraw cash or pay personal bills from the company and park it in an accounting entry called “shareholder loan” or “due from shareholder.” The CRA knows this trick and frequently audits these accounts.

Recent CRA focus: As of 2025, the CRA is more vigilant than ever. It even launched a Shareholder Loan Audit initiative targeting small businesses, using automated systems to sniff out unreported shareholder benefits. They compare things like retained earnings, dividends, and shareholder withdrawals to flag any “loans” that look suspicious.

Examples: When Can a Shareholder Loan Become a Taxable Benefit?

It might not always be obvious which actions could trigger a 15(2) assessment. Here are some realistic scenarios that commonly lead to trouble:

• Personal Expenses Paid by the Company: If your corporation pays for a personal expense of yours, that’s a shareholder benefit. For instance, if the company pays your credit card bill or utility bill, or covers your personal vacation, the CRA sees that as a benefit to you as a shareholder. Often, accountants will record such payments as a loan to shareholder. But if you don’t reimburse the company quickly, the CRA can include those payments in your income under subsection 15(2).
• Direct Cash Withdrawals: The most basic example is taking cash out of the company for yourself without declaring it as salary or dividend. For example, if you write yourself a cheque or e-transfer from the business account and just book it as a “shareholder withdrawal,” it creates a loan from the corporation to you. If that withdrawal isn’t repaid or otherwise accounted for, it’s essentially income in the CRA’s eyes. Many owners do this unknowingly – they treat the company bank account like their own. But those informal withdrawals are exactly what subsection 15(2) targets.
• Personal Use of Corporate Assets: This is slightly different but related to shareholder benefits. If you use a company asset personally (for example, you live in a company-owned house or drive a company car for personal use), the value of that usage can be a taxable shareholder benefit. While this might be taxed under a different provision (15(1) for benefits), it often goes hand-in-hand with shareholder loan issues. For instance, costs paid by the company for that asset (maintenance, etc.) might get dumped into your shareholder loan account.

Key point: Many of these situations start innocently or even by mistake. It’s common for bookkeepers to record things to a shareholder loan account without the owner realizing it. But if those transactions aren’t corrected, they can snowball into a tax problem.

Why a Subsection 15(2) Tax Assessment is Serious

Getting hit with a 15(2) assessment is no small matter – it can be quite harsh. Here’s what it means and why you want to avoid it:

• Income Inclusion: The full amount of the loan or debt gets added to your personal taxable income.
• Tax and Interest: The inclusion is retroactive to the year the loan was taken. In practice, if the CRA finds in 2025 that you had that shareholder loan in 2024, they’ll reassess your 2024 tax return to include it. That means you’ll owe the back-taxes as if it should have been reported in 2024, plus interest charged from the date the 2024 taxes were due.
• Possible Penalties: If the CRA believes you knowingly tried to evade tax by using shareholder loans, they can also apply penalties. A common one is the gross negligence penalty under subsection 163(2) of the Income Tax Act (Canada), which is 50% of the tax avoided.
• No Deduction for the Company: Lastly, remember that if a benefit is assessed to you, it’s not deductible to the corporation. So the company can’t write it off as an expense (unlike a salary which is deductible)

How to Avoid or Defend Against Shareholder Loan Assessments

The good news is that with a bit of planning and discipline, you can avoid the 15(2) trap. And even if you’re already in the trap, there are ways to mitigate the damage. Here are some practical strategies for business owners:

• Repay Shareholder Loans Within the Allowed Timeframe: The simplest way to avoid a loan being taxed under subsection 15(2) is to pay it back fast. This rule generally gives you until one year after the end of the corporation’s tax year in which the loan was made to repay the loan. Don’t try to game the system by repaying the loan and taking a new loan. The law has an anti-avoidance rule about a “series of loans and repayments.” If you repay just before the deadline and then the company loans you a similar amount shortly after, the CRA can deem that you never really repaid it at all. In short, make sure the repayment is genuine and lasting.
• Consider Declaring Income to Clear the Loan: Many owners find it hard to actually pay back a large loan in cash. One common strategy (and one that CRA finds acceptable) is to clear the shareholder loan by converting it into a dividend or bonus. In other words, your company can declare a dividend or pay you a salary/bonus that you use to offset the loan balance. The amount of the loan then effectively becomes taxable income (as a dividend or salary) on your return, which is what would have happened anyway, but you’ve formalized it. Yes, you’ll pay tax on that dividend or bonus, but that’s much better than leaving the loan hanging and then facing a retroactive 15(2) inclusion with the possibility of penalties. In practice, many accountants will do this at year-end: if they see a shareholder loan outstanding, they’ll advise the company to declare a dividend to wipe it out.
• Separate Personal and Business Expenses: Try not to mix personal expenditures with your company’s finances. It’s easy to slip up (using the wrong credit card, etc.), but maintaining a clear separation will save you headaches. When you blur the lines, those amounts often end up in the shareholder loan account. Keep diligent records and have your bookkeeper categorize transactions correctly.
• Meet the Exceptions (If They Apply): Subsection 15(2) has several built-in exceptions for certain loans. If you qualify for one, the loan won’t be taxed as a benefit. The most common exception is for loans to employees (who happen to be shareholders) for specific purposes.

How a Tax Lawyer Can Help if the CRA Comes Knocking

Despite best efforts, mistakes happen and CRA audits do occur. If you’re facing a potential subsection 15(2) issue – maybe you’ve received a CRA audit notice or a reassessment for a shareholder loan – getting professional help is wise. Here’s how a tax lawyer can assist:

• Assessing Your Exposure: A tax lawyer can review your company’s books, especially the shareholder loan account, to determine how much of it might be at risk of being treated as income. They know the 15(2) rules inside-out and can identify what transactions the CRA is likely to challenge. Often, they’ll catch things you might not, like a pattern that CRA could view as a series of loans, or documentation gaps. This initial review helps you understand the scope of the problem and plan a response.
• Dealing with the CRA on your behalf: Facing CRA auditors or appeals officers can be stressful. Tax lawyers are experienced in communicating with the CRA. They can prepare a formal response to an audit proposal or file a Notice of Objection to fight a reassessment. In doing so, they’ll present legal arguments as to why a particular amount shouldn’t be taxed (maybe arguing it falls under an exception, or it was actually repaid, or even that it was an accounting error). They know what arguments have worked in past court decisions and can cite those precedents (for instance, cases where courts sided with taxpayers because the loans were for business purposes or because the taxpayer acted in good faith). By objecting and negotiating, they can often reduce or cancel the proposed taxes. Importantly, when a Notice of Objection is filed, it generally halts collection action on the disputed amount, giving you breathing room while it’s resolved.
• Penalty Negotiation: If penalties have been applied (such as the gross negligence 50% penalty), a tax lawyer will aggressively challenge them if there’s any justification to do so. The CRA must prove “gross negligence,” and if you have some evidence that you acted reasonably or relied on professional advice, lawyers can argue to have those penalties removed.
• Protecting Your Rights and Strategy: Perhaps most importantly, a tax lawyer brings solicitor-client privilege and strategy to the table. Your discussions with them are confidential (unlike with an accountant), so you can candidly explore all options. They’ll devise a plan – whether it’s to negotiate a settlement with CRA or to take the matter to Tax Court if needed. In complex cases, they might work alongside forensic accountants to reconstruct loan accounts and prove repayments were made.

In summary, don’t go it alone if you’re facing a hefty shareholder loan assessment. The stakes – taxes, interest, penalties – can be high, and the rules are complex. A tax lawyer will help ensure the CRA doesn’t overreach, and that you pay no more than you truly owe.

Subsection 15(2) of the Income Tax Act (Canada) is an important rule for any Canadian business owner with a corporation. It’s all about the CRA making sure you don’t enjoy corporate profits personally without paying the proper tax. By understanding this rule, keeping good records, and planning withdrawals carefully, you can avoid the common pitfalls. If the CRA does come auditing, remember that you have options and rights – including the right to get professional help from tax lawyer who deal with these issues regularly.

This article was originally published by Law360 Canada (www.law360.ca), part of LexisNexis Canada Inc.

The CRA’s Voluntary Disclosures Program (VDP) is the built‑in safety valve for taxpayers and businesses who need to fix past tax non‑compliance – before the CRA fixes it for them.

If you failed to file returns, under‑reported income, missed foreign reporting, or messed up GST/HST, the VDP is the formal process to correct those errors. If the CRA grants relief, you may receive penalty relief, interest relief, and no referral for criminal prosecution – but you still pay the underlying tax owing.

This guide walks you through:

• Who qualifies (and who doesn’t)
• The 10‑year relief limit most people overlook
• The difference between unprompted vs. prompted disclosures (and why it matters)
• What relief is available (general relief, partial relief, wash transactions relief)
• How to file a complete RC199 package that the CRA can actually process
• What happens after you apply (including second review and judicial review)
• Why VDP applications get denied – and how to avoid the common traps

1. What Is the CRA Voluntary Disclosures Program?

The VDP is an opportunity to tell the CRA about errors or omissions in your tax obligations and correct them. If the CRA grants relief under the VDP, you can receive some penalty and interest relief and will not be referred for criminal prosecution for the issues disclosed – but any taxes owing still have to be paid in full.

The program applies across a wide range of CRA‑administered obligations. For example, it covers disclosures related to GST/HST and excise taxes, income tax, excise duties, the fuel charge (carbon pricing), luxury tax, underused housing tax, digital services tax, global minimum tax, and certain other federal charges.

Importantly:

• VDP relief is about penalties/interest and prosecution protection – not the tax itself. You generally still pay the tax you should have paid in the first place.
• The CRA reviews VDP requests case‑by‑case, and it is not required to grant relief just because you apply.
• You must be at least one year (or one reporting period) past the filing due date for the issue you’re correcting.
• The CRA expects you to stay compliant going forward. The CRA may consider a later VDP application only in limited circumstances (for example, if the new issue is different or beyond your control).

2. The 10‑Year Limit You Cannot Ignore

The VDP can be hugely helpful – but relief is not unlimited.

For income tax, the CRA’s ability to cancel penalties and interest is constrained by a 10‑year limitation period:

• Penalty relief: limited to penalties that could apply to tax years that ended within the previous 10 years before the calendar year you file the application.
• Interest relief: the CRA can cancel interest that accrued during the 10 calendar years before the year you request relief (even if the underlying tax debt is older).

For GST/HST and other “applicable Acts,” relief is also tied to statutory limitation periods under those Acts. Bottom line: don’t assume a disclosure automatically wipes away decades of interest and penalties – get clear on what years/periods are realistically inside the relief window.

3. Who Can Apply?

Most taxpayers and registrants can apply.

Taxpayers include:

• Individuals
• Employers
• Corporations
• Partnerships
• Trusts

Registrants include (examples):

• GST/HST registrants or claimants
• Excise duty licensees/registrants
• Excise tax licensees
• Excise tax refund claimants
• Air travellers security charge registrants / designated air carriers
• Softwood lumber product exporters

4. What Issues Are Typically Eligible?

If you’re fixing a real compliance problem (something that normally attracts interest and/or penalties), you’re in the territory the VDP is designed for.

Common VDP‑eligible situations include:

• Not filing a tax return (and it’s now at least one year late)
• Not reporting or under‑reporting income
• Claiming ineligible expenses
• Not remitting employee source deductions (CPP/EI, etc.)
• Not filing required information returns (for example, T1135)
• Not reporting foreign‑sourced income taxable in Canada
• Having undisclosed tax liabilities
• Failing to charge, collect, or report GST/HST
• Claiming ineligible GST/HST credits, refunds, or rebates
• Providing incomplete information on a return

5. The Eligibility Checklist

To be eligible for VDP relief, you must meet all five conditions below:

1. Apply before an audit or investigation starts against you (or a related taxpayer) about the information being disclosed.
2. Include all relevant information and documentation for the required tax years/reporting periods.
3. The disclosure involves an error or omission with applicable interest charges and/or penalties.
4. The information is at least one year (or one reporting period) past the filing due date.
5. You include payment of the estimated tax owing, or a request for a payment arrangement (subject to CRA approval).

What CRA officers care about in practice:

• Voluntary timing: Did you come in before the CRA started enforcement for this issue?
• Completeness: Are all affected years/periods covered, or are there obvious gaps?
• Paperwork quality: Are the returns/forms/schedules actually filed and consistent with your story?
• Payment realism: If you’re asking for a payment arrangement, is it reasonable and supported? The CRA’s approval is not guaranteed.

6. Unprompted vs. Prompted: The One Difference That Drives Your Relief

The updated VDP (effective October 1, 2025) uses two application types:

Unprompted application

You’re normally unprompted when:

• You apply when there has been no CRA communication (verbal or written) about an identified compliance issue related to the disclosure; or
• You apply after an education letter or notice that offers general guidance and filing information on a topic (those usually do not “prompt” you into a lower tier).

Example: You discover a missed T1135 and unreported foreign income, and you apply before the CRA identifies your specific issue.

Prompted application

You’re generally prompted when:

• You apply after CRA communication that identifies the compliance issue, such as a letter/notice (excluding education letters) that:
  • identifies a specific error or omission on your account, and/or
  • gives a deadline to correct the issue; or
• You apply after the CRA has already received third‑party information about potential non‑compliance involving you (or a related taxpayer/registrant).

Example: The CRA sends a letter saying they found a specific omission on your account and expects you to correct it by a certain date.

Why this matters:

Your application type typically determines whether you qualify for general relief or partial relief (next section).

7. What Relief Can You Get?

If the CRA grants VDP relief, there are different levels depending on whether your application is unprompted or prompted.

General relief (normally for unprompted applications)

• 75% relief of the applicable interest
• 100% relief of the applicable penalties

Partial relief (normally for prompted applications)

• 25% relief of the applicable interest
• Up to 100% relief of the applicable penalties

Wash transactions relief (GST/HST)

Certain GST/HST “wash transaction” situations are normally eligible for 100% relief of interest and penalties, where they fall under the CRA’s wash transaction policy.

8. How to Apply (Form RC199 Step‑by‑Step)

The CRA will consider fully completed applications only. Your application must include three things: a signed RC199, the necessary supporting documents to correct the issue, and payment or a payment arrangement request.

Step 1: Gather everything (don’t guess if you don’t have to)

Your VDP package should include:

• The completed and signed Form RC199
• All necessary returns, forms, schedules, and statements needed to correct the non‑compliance
• Payment, or a request for a payment arrangement, for the estimated tax owing

Step 2: Be complete

A “complete” disclosure generally means:

• You disclose all known errors and omissions.
• You respond comprehensively and promptly to CRA requests for additional information (if they ask).

Step 3: Include payment (or request a payment arrangement)

A valid application must include payment of the estimated tax owing or a request for a payment arrangement, subject to CRA approval.

Step 4: Submit using one method

You can submit online, by fax, or by mail — but use only one method.

• Online: through CRA My Account (individuals), My Business Account (businesses), or Represent a Client (representatives).
• Fax: 1‑888‑452‑8994
• Mail:
   Voluntary Disclosures Program
   4695 Shawinigan‑Sud Boulevard
   Shawinigan, QC G9P 5H9

Optional – Pre‑disclosure discussion (anonymous)

If you’re unsure whether to apply, the CRA offers a pre‑disclosure discussion service where you can speak anonymously to get insight into the process and risks. It’s informal and non‑binding, and it does not guarantee relief.

9. What Happens After You Apply?

If the CRA grants VDP relief, it will send you a letter confirming:

• whether the application is treated as unprompted or prompted,
• what level of relief applies (general, partial, or wash transactions), and
• which tax years/reporting periods are eligible.

If the CRA does not grant relief, it will send a letter explaining why.

If you disagree with CRA’s decision

You can:

• request a second administrative review, and/or
• apply to the Federal Court for judicial review.

10. Common Reasons VDP Applications Get Denied

From the CRA’s published requirements, the same pitfalls show up repeatedly:

• It’s not voluntary: an audit or investigation has already started on the issue.
• It’s incomplete: missing returns, missing schedules, missing periods, or missing facts.
• No payment / no payment plan request: you didn’t include payment or a payment arrangement request.
• Wrong tool for the job: you’re trying to use VDP for refund‑only adjustments, already‑assessed penalties/interest, elections, etc.
• You left out other non‑compliance: the CRA later discovers additional issues you didn’t disclose – a major credibility problem.
• You don’t respond to CRA follow‑ups: failure to provide additional information within CRA timeframes can lead to denial.

11. How a Tax Lawyer Can Strengthen a VDP Application

A good VDP application is part accounting, part law, and part “storytelling with evidence.”

A tax lawyer can help by:

• Assessing eligibility early (so you don’t make a disclosure that gets rejected.
• Positioning unprompted vs. prompted correctly, based on CRA’s definitions and the communications you’ve received.
• Ensuring the disclosure is complete (all affected years/periods, all required supporting documents, no silent gaps).
• Managing risk and communications (including responding to CRA requests and keeping the process controlled).
• Challenging an unfair result, through a second administrative review and, where appropriate, judicial review in Federal Court.

12. Need Help With the CRA Voluntary Disclosures Program?

If you know (or strongly suspect) you have unreported income, missing filings, or serious GST/HST issues, doing nothing is usually the worst option. The VDP exists so you can correct the past with significantly reduced consequences – but relief is not automatic, and a poorly prepared application can be denied.

If you’re unsure whether you qualify, or you want help preparing a complete RC199 package, getting professional advice early can make the difference between:

• a clean disclosure with meaningful relief, and
• a denied application with the CRA now aware of the issue.
  

Tax disputes in Canada are governed by strict deadlines under the Income Tax Act (Canada) (ITA) and the Excise Tax Act (Canada) (ETA). Missing these time limits for objections, appeals, or relief requests can forfeit a taxpayer’s rights. Below is a comprehensive list of certain key deadlines (and applicable extensions) for tax objections, appeals, taxpayer relief, and collections.

Objection Deadlines and Extensions

When a taxpayer disagrees with an assessment, a Notice of Objection must be filed within a prescribed time. If an objection deadline is missed, both Acts allow an application for an extension of time to object, first to the CRA and then (if needed) to the Tax Court of Canada (TCC). The table below summarizes the objection filing deadlines and extension timelines:

Deadline / Event	Time Limit (Objection Stage)
Notice of Objection – ITA (Individual taxpayers)	Later of 90 days from the date of the Notice of Assessment or 1 year after the taxpayer’s filing due date for that return. This, potentially extended option, applies to individuals (other than trusts) and graduated rate estates.
Notice of Objection – ITA (Corporations & others)	90 days from the date of the Notice of Assessment or Notice of Reassessment.
Notice of Objection – ETA (GST/HST)	90 days from the date of the Notice of Assessment (for GST/HST and other amounts under the ETA).
Apply for Extension of Time to Object – ITA	Must apply to the CRA within one year after the 90-day objection deadline.
Apply for Extension of Time to Object – ETA	Must apply to the CRA within one year after the 90-day objection deadline.
If Extension Request is Denied by CRA (ITA)	Taxpayer can apply to the TCC for an extension within 90 days of the CRA’s refusal notice. Also, if the CRA has not responded to an extension application within 90 days of filing it, the taxpayer may apply to the TCC as though it were refused. The TCC can then consider and either grant or dismiss the extension request.
If Extension Request is Denied by CRA (ETA)	Taxpayer can apply to the Tax Court within 30 days of the CRA’s refusal of the extension (or if 90 days have elapsed with no decision). The ETA thus provides a shorter 30-day window after a refused extension request for objections to seek the Court’s intervention.

Appeal Deadlines and Extensions

If the outcome of an objection is unfavorable (or unduly delayed), the next step is to appeal to the Tax Court of Canada. The ITA and ETA set deadlines for filing a Notice of Appeal after the CRA’s decision on an objection. The key documents to look out for that conclude a Notice of Objection are a Notice of Confirmation if no change is made to the assessment in dispute, or a Notice of Reassessment if the assessment in dispute has been varied. There are also provisions to appeal if the CRA delays its objection decision beyond a certain time. For missed appeal deadlines, a taxpayer can seek an extension of time to appeal by applying to the Tax Court. Key appeal-related deadlines are outlined below:

Deadline / Event	Time Limit (Tax Court Stage)
Notice of Appeal to Tax Court – ITA	90 days from the date the CRA mails its Notice of Confirmation (or notice of Reassessment) on the objection. If the CRA fails to issue a decision on the objection within 90 days of the objection being filed, the taxpayer is entitled to appeal to the Tax Court as though the objection were denied.
Notice of Appeal to Tax Court – ETA	90 days from the date the CRA (Minister) sends the Notice of Confirmation or Notice of Reassessment after an objection. If 180 days have passed since the objection was filed under the ETA and no decision has been communicated, the taxpayer is entitled to appeal to the Tax Court as though the objection were denied.
Apply for Extension of Time to Appeal to Tax Court – ITA	Must apply to the Tax Court within one year after the 90-day appeal period has expired.
Apply for Extension of Time to Appeal to Tax Court – ETA	Must apply to the Tax Court within one year after the 90-day appeal period has expired.

Taxpayer Relief Deadlines and Recourse

The Taxpayer Relief provisions allow the CRA to cancel or waive penalties and interest in extraordinary circumstances (or to accept certain late filings/elections). Such relief requests are subject to a strict 10-year limitation. If the CRA denies a relief request, the taxpayer cannot appeal to the Tax Court; instead, the decision may be challenged by an application for judicial review in the Federal Court. Key deadlines in this context:

Deadline / Event	Time Limit (Relief and Review)
Taxpayer Relief Request (Interest/Penalties)	Must be submitted within 10 years from the end of the calendar year or fiscal period to which the request relates.
Judicial Review (Relief Denial) – Federal Court	If the CRA denies a relief request (or grants only partial relief), the taxpayer first has the right to request a second review of the decision. Once a decision is rendered on the second review, the taxpayer can apply to the Federal Court for a judicial review within 30 days of receiving the CRA’s decision.

Collections Limitation Period (Ultimate Deadline for Tax Debt Collection)

Both the ITA and ETA impose an “ultimate” limitation period on the CRA’s ability to collect a tax debt. In general, the Canada Revenue Agency has 10 years to collect a tax debt, after which no further collection action can be taken unless the clock is reset by certain events (such as a payment or a written acknowledgement of the debt, or the CRA taking specific collection actions). Important points on limitation period for collection action:

Deadline / Event	Time Limit (Collections)
Collections Limitation Period – ITA	Generally, 10 years from the “date the Minister can first legally begin collection” of the tax debt. Under subsection 222(3) of the ITA, the CRA cannot commence or continue collection action after this 10-year period expires. However, ITA subsection 222(5) provides that certain actions restart the 10-year clock – for example, if the CRA takes any action to collect (like a written demand or garnishment) or the taxpayer makes a payment or acknowledges the debt in writing, the limitation period is reset and starts running anew from that date.
Collections Limitation Period – ETA	Generally, 10 years from the start of the limitation period for the GST/HST or excise tax debt. Similarly, under section 313 of the ETA, the Minister may not commence or continue collection action of a tax debt after 10 years from when the period begins. The 10-year period begins once the amount is assessed and collectible (post-appeal or 90-day no-objection window) and is extended/reset by any taxpayer acknowledgement or CRA action to collect the debt. If a full 10 years passes with no collection activity and no acknowledgements, the debt becomes statute-barred from collection.

A Notice of Reassessment means the CRA has reviewed a return that was already assessed and changed it – often affecting your tax owing, refund, penalties, and interest. What matters now is doing the right things in the right order – especially before the clock runs out.

Step 1: Do this today (the “don’t-miss-a-deadline” checklist)

1. Find the notice date (the date on the notice).
    This date generally drives your objection deadline. Determine your objection deadline.
2. Identify exactly what changed.
    Compare the reassessed amounts to your original filing (income, deductions, credits, penalties, interest).
3. Pull every CRA letter that led up to this.
    Reassessments often follow a review/audit where the CRA requested documents.
4. Collect your proof.
    Receipts, invoices, contracts, bank records, bookkeeping reports, slips, correspondence—anything that supports your original position.
5. Calendar the objection deadline immediately.
    Make sure that you document your objection deadline and do not miss it.

Step 2: Choose the right path (not every reassessment needs a fight)

A reassessment usually falls into one of these situations:

A) You agree with the change

Pay what’s owed (or set up a payment arrangement). Interest can keep accumulating on balances owing.

B) You disagree (facts misread or law misapplied)

That’s when a Notice of Objection is usually the next step. Objections are for situations where you believe they misinterpreted your facts or applied the law incorrectly.

Step 3: Know the deadline that matters most

Individuals (and graduated rate estates)

Your objection deadline is generally whichever is later:

• 1 year after the tax filing deadline for the return, or
• 90 days from the date of your notice of reassessment.

Corporations

Your objection deadline is generally:

• 90 days from the date of your notice of reassessment.

Missed the deadline?

You may apply for an extension, and the CRA states you can apply up to one year after the objection deadline (and you can apply at the same time as you file your objection).

Step 4: File a Notice of Objection

The CRA’s guidance is straightforward: when you object, you must clearly explain what you’re objecting to and why, and include relevant facts and supporting documentation.

What to include in a strong objection

• The tax year and the Notice of Reassessment you’re objecting to
• The specific items you disagree with (line items/issues)
• A clear explanation of why (facts + law, where relevant)
• The documents that prove your position
• A summary your reviewer can follow quickly

How to file

You can file:

• Online in CRA portals (My Account / My Business Account) using “Register my formal dispute”, and then upload documents through “Submit documents online.”
• Through your authorized representative via Represent a Client
• By mail/fax using Form T400A (Objection – Income Tax Act) or a signed letter with the facts, reasons and the same information that would go into a T400A form.

Step 5: Does interest continue to accrue while you object?

Interest charges continue to accrue while the amount is in dispute. You can pay the amount in dispute to avoid additional interest.

Step 6: What happens after you object?

Once you file, the CRA reviews what you submitted and will either:

• agree (in whole or part) and issue an adjustment/reassessment, or
• disagree and send a notice saying the reassessment/determination was correct

Step 7: If the CRA says “no,” the next step is Tax Court

If you disagree with the CRA’s decision on your objection, you can appeal to the Tax Court of Canada. Generally, you have 90 days from the CRA’s reassessment /determination following your objection to file your appeal.

How far back can the CRA go?

Under the Income Tax Act, the “normal reassessment period” is generally:

• 4 years for a mutual fund trust or a corporation that is not a CCPC, and
• 3 years in most other cases, counted from the day the CRA sent the original assessment (or the original “no tax payable” notification).

The CRA can reassess after that normal period in specific situations – such as where there was a misrepresentation attributable to neglect, carelessness, wilful default, or fraud, or where a waiver was filed.

One more option people miss: relief from penalties and interest

If your main issue is penalties and/or interest (not the underlying tax), you may be able to request taxpayer relief (discretionary, fact-driven). There’s also a 10‑year limitation period for interest relief requests (and related limits for penalties/interest outside the eligible window).

Bottom line

A CRA Notice of Reassessment isn’t the end of the road – but it is a deadline-driven process. If you believe the reassessment is incorrect, the goal is to:

• lock in your deadlines,
• build an evidence-based position, and
• file a clean, timely objection that’s easy for CRA to understand.

If you want help assessing the notice, preparing your objection, or planning next steps (including Tax Court strategy), contact Taxpayer Law today.

Tax disputes can be daunting for any business. When faced with a Canada Revenue Agency (CRA) audit or a tax reassessment, companies need a lawyer who can provide not only competent legal defense but also practical guidance through the process. A successful tax litigation (or tax dispute resolution) lawyer will protect the company’s interests, navigate complex tax laws, and strive for the best outcome – whether that means negotiating a favorable settlement or fighting a case in court. The following are key qualities and skills to look for in a strong tax disputes advocate for your business.

Legal Expertise in Canadian Tax Law

At the core, a good tax litigation lawyer must have mastery of tax law. Tax is an intricate and ever-changing field, so your lawyer should have in-depth knowledge of Canadian tax statutes, regulations, and case law. This expertise enables them to interpret complex rules and apply tax laws to your advantage. Look for a practitioner with a proven track record in resolving tax disputes – their past successes and years of focused experience are a testament to strong technical skills. Top tax litigators often have significant technical expertise, giving them insight into the nuances of corporate tax, GST/HST, international tax and more. In short, a successful tax disputes lawyer offers deep and up-to-date tax knowledge, which is critical when your business is dealing with complicated assessments or obscure provisions of the law.

Strategic Thinking and Problem-Solving

Tax controversies require not just knowledge, but also strategic savvy. Every tax dispute is unique, so a skilled lawyer will assess the specifics of your situation and develop a customized resolution strategy rather than a one-size-fits-all approach. This strategic thinking involves evaluating the strength of your legal position, anticipating the CRA’s tactics, and deciding when to negotiate or when to litigate. The best tax litigators are innovative problem-solvers who can find creative, cost-effective ways to settle issues early when possible. They will outline a clear plan – for example, whether to engage in settlement discussions, file a notice of objection, or proceed to the Tax Court – and adapt that plan as new developments arise. In high-stakes corporate tax disputes, this kind of foresight and planning can save your business time, resources, and uncertainty.

Familiarity with the CRA and Canadian Courts

Successful tax dispute lawyers know the terrain of tax enforcement and litigation. That means being thoroughly familiar with the CRA’s processes (from audits and investigations to the appeals process) as well as the procedures of the Tax Court of Canada and other courts. A seasoned tax litigator is well-versed in the rules and procedures laid out by the CRA and the Tax Court of Canada, ensuring that your case is handled in full compliance with the proper protocols. Many leading practitioners have experience dealing with CRA auditors and appeals officers on a daily basis, and some even come from backgrounds as former CRA lawyers or Tax Court clerks. This insider familiarity can be a huge asset – your lawyer will know how to navigate the CRA’s bureaucracy and anticipate common issues or delays. And if your case does end up in court, they will have the advocacy experience to present a solid defense before a judge. In short, look for counsel who regularly deals with the CRA and appears before the Tax Court, as this experience helps them handle your dispute efficiently and effectively.

Strong Negotiation Skills

In Canada, the majority of tax disputes with the CRA are resolved out of court, often through settlements or negotiated agreements. Therefore, a tax disputes lawyer must be an adept negotiator. They should be skilled in communicating with tax authorities on your behalf, addressing the issues in contention and exploring avenues for settlement. Effective negotiation can result in significant benefits – for example, your lawyer might manage to negotiate a settlement with the CRA that lessens your company’s tax liability or avoids hefty penalties. This skill requires both legal acumen and tact: a good tax lawyer will know the strengths and weaknesses of your case and use that knowledge as leverage in discussions with Department of Justice lawyers. They also understand the CRA’s perspective and constraints, which helps  finding a middle ground where possible. By choosing a lawyer with strong negotiation skills, you increase the likelihood of a faster, mutually acceptable resolution that spares your business the uncertainty of a trial.

Industry-Specific Knowledge and Business Acumen

Tax issues do not exist in a vacuum – they are intertwined with the business activities and industry context of the taxpayer. A successful tax litigation lawyer for a corporation will take the time to understand your company’s industry, business model, and objectives. Familiarity with the specific sector (be it technology, real estate, finance, manufacturing, etc.) allows the lawyer to anticipate unique tax challenges and craft arguments that make sense in your business context. Importantly, an effective advocate sees the bigger picture beyond just legal rules. In practice, this means your tax lawyer should recognize what a dispute means for your operations, finances, and stakeholders. They might, for example, know how a potential tax settlement could impact your financial statements or industry reputation. This blend of tax knowledge and business acumen ensures that the advice you get is practical and aligned with your corporate goals.

Effective Communication with Corporate Stakeholders

Tax law is full of technical jargon and arcane concepts, so a lawyer’s ability to communicate clearly is paramount. The ideal tax dispute lawyer can distill complex tax and legal issues into plain language for their clients. They will explain complicated tax concepts in a way that you and your team can understand, and they remain responsive to questions and concerns throughout the process. This communication skill is important not only for the day-to-day lawyer-client relationship, but also for keeping all corporate stakeholders informed. For instance, the lawyer should be comfortable briefing your company’s executives or board members on the status of a case and its implications. They should also be able to work collaboratively with other professionals such as your accountants or financial advisors. A good tax litigator often coordinates with a corporate client’s CFO or external tax advisors to ensure everyone is on the same page. In court or negotiations, strong communication skills translate to persuasive advocacy – but internally, they mean you’ll always know where your case stands and can make informed decisions. In short, look for an advocate who is not just legally savvy but also a clear communicator and trusted advisor to your business.

Conclusion

When a Canadian business is selecting a tax litigation and disputes lawyer, these qualities – deep tax law expertise, strategic thinking, CRA/courts familiarity, negotiation prowess, industry knowledge, and solid communication – are key indicators of a strong advocate. A lawyer who embodies these traits will be well-equipped to protect your company’s interests in a tax dispute. They will navigate the technicalities of tax legislation and the nuances of CRA procedure, all while keeping your business objectives in focus. By choosing a tax disputes lawyer with the right mix of legal skill and practical insight, you can approach any CRA audit or tax litigation with greater confidence that your case is in capable hands.