Tax Dispute Resolution

Mock Audits

Tax audits happen often.

Before a tax auditor knocks at your door, why not have a friendly party go through the audit process to prepare you? We can pinpoint your areas of exposure and prepare you for the types of questions you will likely be asked in the audit. In addition, by diagnosing problem areas in advance, we can sometimes correct mistakes and thus leave far less on the table for the tax auditor to find.

Assisting in Tax Audits/Disputing Tax Assessments

In the Canadian environment of high tax rates, complex tax rules, frequent change, and an aggressive approach by the CRA, the fact that Canadian taxpayers have disputes with the tax authorities is understandable and inevitable. We assist in resolving these disputes and represent clients with a well-researched defence of a position. Where the dispute is of a more serious nature, we will work closely with legal counsel if called for.
In tackling such an assignment, we

  • meet with the client to review the circumstances;
  • review the taxpayer’s financial statements, tax returns, notices of assessment and reassessment, and the CRA correspondence, as well as any other relevant materials;
  • give a preliminary opinion as to an appropriate defence and the chances of success;
  • prepare any required documents, such as a notice of objection;
  • obtain information from the CRA, including internal documents, memos, and notes used by the CRA in support of its position;
  • meet with the CRA representatives, in either the audit division or the appeals division, to present the taxpayer’s case; and
  • negotiate a settlement when negotiation is called for.

If the dispute cannot be resolved in the appeals area and proceeds to court, or if the matter is particularly serious, the situation may be referred to legal counsel in the first instance. In such cases, we work closely with legal counsel in a support role on the client’s behalf.

Voluntary Disclosures

The voluntary disclosure process is a means by which deficiencies in income tax returns can be corrected without penalty or fear of prosecution. We have assisted in hundreds of voluntary disclosure cases, and understand theCRA practices and procedures.
We can

  • determine the most appropriate filing position for reporting previously undisclosed income;
  • investigate possible tax strategies to minimize the taxes involved;
  • present the situation to the CRA on a “no names basis,” and attempt to negotiate a favourable settlement before revealing the identity of the client;
  • negotiate a waiver of interest in certain extraordinary circumstances; and
  • negotiate payment terms over an extended period of time if necessary.

We normally undertake this work only on a retainer basis.

Net Worth Assessments

The CRA sometimes uses an auditing technique called a net worth assessment. It is normally used to detect unreported income. Basically, this involves determining the increase in a person’s net worth over a period of time, and then examining the person’s sources of income, expenses and financial resources to determine whether the income as reported can reasonably account for the change in net worth. The CRA is making increased use in this approach, and assessments can be made in error. Penalties of 50% are normally added.

When asked to undertake a defence of a client who is subject to a net worth assessment, we

  • meet with the client to determine the true facts;
  • review the CRA’s working papers to determine any obvious errors;
  • negotiate with the CRA to obtain a reasonable settlement of the amount in dispute, which may involve filing a notice of objection and discussing the matter with the appeals division; and
  • involve legal counsel to assist us where the amounts involved are large, or where criminal allegations are made.

We have developed our own software to replicate the CRA net worth calculations and test the assumptions used.
We normally undertake this work only on a retainer basis.