I Got a CRA Reassessment and I Think It's Wrong. What Do I Do?

A CRA reassessment is not the same as an audit letter or a review letter, and not the same as a request for documents. It is a notice telling you the CRA has changed your tax for a specific year, usually increasing the amount you owe. You have the right to dispute it formally, and the statute gives you a fixed window to do so. The instrument is a notice of objection under section 165 of the Income Tax Act, and roughly 128,000 taxpayers filed one in 2024-25. The CRA agreed with the taxpayer, in whole or in part, about 55% of the time over a seven-year average. That is not a typo: more than half the time, the taxpayer was at least partially right. If you have a cross-border file (US and Canadian filing obligations), the stakes are higher because a Canadian reassessment can cascade into a US foreign tax credit recalculation, a treaty claim adjustment, or an amended 1040. Start with the objection deadline, because it is a hard cutoff.

What is a CRA reassessment, and how is it different from an original assessment?

An original assessment is the first time the CRA processes your return and tells you your balance. A reassessment is any subsequent change the CRA makes to that balance for the same tax year, whether you asked for it (by filing a T1-ADJ) or the CRA initiated it after a review, an audit, or a matching program. The reassessment replaces the original; the new notice of assessment is now your tax bill. Common triggers: unreported income matched from T-slips or information exchanges with the IRS (section 152(4)), disallowed deductions or credits after a review, reclassification of income (for example, employment income reclassified from business income), or a foreign income adjustment after CRA receives data under a treaty exchange agreement. If the reassessment increases your tax, it usually also adds interest from the original due date and may add penalties.

How long does the CRA have to reassess me?

The CRA cannot reassess forever. The normal reassessment period under section 152(3.1) is three years after the date of the original assessment for individuals and four years for corporations other than CCPCs. After that window closes, the CRA generally cannot touch that year unless one of the statutory exceptions applies. The main exceptions: misrepresentation due to neglect, carelessness, or wilful default (section 152(4)(a)(i)), which has no time limit; a waiver signed by the taxpayer on Form T2029 (section 152(4)(a)(ii)); or certain specified transactions including foreign-property adjustments for which the taxpayer failed to report (section 152(4)(b)(iii)). If you filed a T1135 late or not at all, the three-year clock may not protect you.

For cross-border filers, the foreign-property exception matters. If the CRA reassesses you outside the normal period on the basis of unreported foreign property or income, check whether the specific exception they cite actually applies to your facts. A reassessment that arrives in year five citing misrepresentation carries a different burden of proof than one citing a Form T1135 you never filed, and the CRA sometimes cites the wrong provision. The burden of proof on misrepresentation is the CRA’s, not yours (Nesbitt v. The Queen, 96 DTC 6588).

How do I file a notice of objection?

Three ways: through My Account online, by mailing Form T400A (Notice of Objection Under the Income Tax Act) to the Chief of Appeals at your tax centre, or by letter that covers the same ground. The statutory requirement is “in writing, setting out the reasons for the objection and all relevant facts” (section 165(1)). My Account is the fastest route if your account is active. If you are a non-resident and your My Account access has been cut off (a common problem after emigrating), mail or fax the T400A directly.

What to write matters. The most common mistake is a one-line objection that says “I disagree.” The CRA Appeals officer who picks up your file needs to understand what specific items you are contesting, why you believe the reassessment is wrong, and what evidence supports your position. Be specific: “The reassessment disallowed my foreign tax credit of $4,200 for US taxes paid. I have attached the 1040 and the cancelled cheque. The credit is available under section 126(1) and the treaty does not restrict it.” That is more useful than “I paid US tax and should get credit for it.”

If someone else is filing on your behalf (a CPA, a lawyer, a family member), the CRA needs an active authorization. For a CPA, that means a current Represent a Client authorization on file, or a signed Form T1013 submitted with the objection.

What is the deadline for filing the objection?

For individuals, the deadline is the later of 90 days after the date the notice of reassessment was sent, or one year after the filing-due date for that tax year (section 165(1)(a)). For corporations and trusts, it is strictly 90 days from the date the notice was sent (section 165(1)(b)). The one-year-after-filing-due-date rule for individuals means that if you were reassessed within a few months of filing, you may have more than 90 days. But once that window closes, it closes. If you miss it, section 166.1 allows you to apply to the CRA for an extension of up to one additional year, and if the CRA refuses, section 166.2 lets you ask the Tax Court to grant the extension. But neither route works if more than one year has passed since the deadline.

What happens while the objection is being reviewed?

The CRA’s Appeals division handles the file independently of the auditor who issued the reassessment. Current processing times for penalty and interest relief requests are approximately 16 months (CRA’s published estimate as of mid-2026), and objections can take longer depending on complexity: the CRA’s own reporting breaks it into 125 days for low-complexity, 365 days for medium-complexity, and 896 days for high-complexity cases.

Interest continues to accrue on the disputed amount during the entire review period (section 161). This is the part that surprises people. Even if the CRA ultimately agrees with you, the interest that accumulated during the dispute does not automatically disappear. You may need to file a separate taxpayer relief request on Form RC4288 to have interest waived for the period attributable to CRA processing delays.

Collection activity is generally suspended while an objection is outstanding (section 225.1), meaning the CRA should not garnish your wages or freeze your bank account while the objection is pending. But this collection hold applies only to the amounts under dispute. If you owe undisputed amounts for other years, the CRA can and will collect on those.

What are the real success rates for CRA objections?

Roughly 55% of objections result in a full or partial change in the taxpayer’s favour, based on seven-year averages from the CRA’s published data. That figure includes cases where the CRA agrees completely, cases where it splits the difference, and cases where it makes a concession on one issue while denying another. It does not mean 55% of objections are fully allowed; many are partial wins.

The success rate varies dramatically by issue. Objections on straightforward credit disallowances (the CRA missed a T-slip, or a foreign tax credit was wrongly denied) tend to succeed at higher rates because the fix is documentary. Objections on characterization questions (is this business income or capital gains? is this an employee or a contractor?) are more fact-intensive and have lower success rates at the objection stage, though they may succeed at Tax Court. Objections on the T1135 foreign property reporting penalties are increasingly common and often turn on whether the late filing was “reasonable” under the circumstances.

What if the CRA denies my objection?

The CRA will issue a Notice of Confirmation or a Notice of Reassessment. If confirmed (meaning the CRA stands by its position), you have 90 days to file a Notice of Appeal with the Tax Court of Canada (section 169(1)). You can also appeal if the CRA has not responded within 90 days of your objection by filing directly with the Tax Court without waiting for the decision.

The Tax Court offers two procedures. The Informal Procedure applies when the federal tax in dispute is $25,000 or less per year, or when the only issue is a loss determination up to $50,000. It is simpler, cheaper, and does not require a lawyer, though representation helps. The General Procedure applies to amounts above those thresholds and follows standard litigation rules. In either case, the burden of proof is on the taxpayer for most issues, with the notable exception of penalties: the CRA bears the burden of justifying a penalty (section 163(3)).

If you are a non-resident or a cross-border filer, the Tax Court can still hear your case. The court sits in multiple cities across Canada and can accommodate non-resident taxpayers, including by teleconference.

Should I pay the reassessment while I dispute it?

You do not have to pay to file the objection, and the CRA should suspend collection while the objection is pending (section 225.1). But interest accrues every day. If you ultimately lose, the interest bill will be significantly larger than the original reassessment by the time the dispute resolves. For a $20,000 reassessment that takes 18 months to resolve at the CRA’s prescribed interest rate (which has run between 8% and 10% compounded daily in recent years), the interest alone can add $2,500 or more.

The strategic question is whether paying the disputed amount and then claiming a refund if you win is cheaper than letting interest accrue if you lose. There is no one-size-fits-all answer. If you are confident in your position and the amount is large, consider paying under protest and noting in writing that the payment is without prejudice to your objection. This stops the interest clock. If you win, the CRA refunds the overpayment with interest.

Can the CRA reassess departure tax or foreign income?

Yes, and these are the reassessments that hit cross-border filers hardest. A departure-tax reassessment typically involves the CRA adjusting the fair market value of assets on the departure date (section 128.1(4)), disallowing the principal residence exemption, or challenging the departure date itself. If your departure date is wrong, every downstream calculation moves. Foreign income reassessments often arise from information exchanges: the CRA receives data from the IRS under Article XXVII of the treaty and flags unreported US-source income on your Canadian return.

For anyone with both a Canadian objection and a US return at stake, the IRS Form 3520 penalty fight and the streamlined filing procedures may also be in play. The coordination problem is real: if you fix the Canadian side first without considering the US side, you may lock yourself into a position on the US return that is hard to undo.

What should I do next?

Read the reassessment notice line by line. Identify the specific items the CRA changed. Check the deadline (90 days from the date on the notice, or one year from filing-due date for individuals, whichever is later). Gather the supporting documents for the items you disagree with. File the objection in writing with specific facts and reasons, not a one-line disagreement.

If the reassessment involves foreign income, a departure-tax question, or treaty claims, the US return is affected and the US protective claim should be filed in parallel. Do not wait for the Canadian outcome to protect the US statute. If the reassessment adds a shareholder benefit under section 15, the defense is documentation-based and the amounts can be significant for owner-managed businesses.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.