A recent case from Canada’s tax court highlights the need for Canadians to double check their tax slips and promptly correct any errors — even those made by the tax agency itself.
In a March 6 decision, the Tax Court of Canada ruled that a B.C. realtor, Amarpal Singh, was obliged to pay tax on an inflated and erroneous income because he failed to challenge the Canada Revenue Agency’s administrative error within the prescribed period.
“Although the Minister [of National Revenue] made a stupid mistake in reassessing [Singh’s income], I have no discretion to extend the time limitations set out in the [Income Tax Act],” Justice David Spiro wrote in his decision.
Mohammed Al-khooly, an Ontario-based Chartered Professional Accountant, says the case underscores the importance of Canadians addressing tax issues promptly and through formal tax agency channels.
“ I think there’s a habit amongst people when they get a CRA notice, they might just set it aside, or they might be busy with their regular life and not prioritize it. But I think this [case] kind of shows you how important timeliness is,” Al-khooly said.
‘A matter of justice’
Singh’s predicament began when he received tax slips for commission income from a single payor, Nationwide Realty Corp. The corporation issued Singh a T4A showing income of $53,257 in 2019. It later amended the T4A to show income of $55,074.
“But then the Minister of National Revenue … made a stupid mistake,” Spiro wrote in his decision.
“Rather than recognizing that the Amended T4A replaced the original T4A, the [Canada Revenue Agency] added the amount reflected on the Amended T4A to the amount reflected on the original T4A, leading to an erroneous reassessment of the Applicant’s income for 2019 of $108,332.18.”
In 2022, Singh received notice from the Canada Revenue Agency saying his 2019 income had been reassessed at the sum of the amounts on the two tax slips, the court judgment says. Singh testified that he spoke to CRA agents twice but took no notes of his calls.
“ Every single employee of the CRA, they said, ‘Yeah, we agree. It’s not your mistake. It’s our mistake,” Singh told Canadian Affairs in an interview.
But Justice Spiro says his hands are tied.
As a result, Singh says he is now required to pay nearly $15,000 in additional income tax.
The Canada Revenue Agency told Canadian Affairs it is not able to comment on the particulars of Singh’s case. But it said it does try to help Canadians in Singh’s situation.
“If Canadians find themselves in a situation similar to the case mentioned and call the Canada Revenue Agency (CRA) general enquiries lines, a contact centre agent will examine their file to help them determine the best course of action,” an agency spokesperson told Canadian Affairs in an emailed statement.
“Often, a formal objection is not required.”
But Al-khooly says Canadians should be proactive about formally challenging any tax irregularities.
“You’re basically relying on the CRA’s goodwill if you don’t go through the formal notice of objection process,” he said.
He also recommends Canadians consult qualified tax professionals for tax matters that exceed their understanding.
“Seek the required professional advice in this situation … [from someone who] can educate you and make sure you’re not forfeiting any kind of appeal.”
The Canada Revenue Agency told Canadian Affairs it has the discretion to cancel or waive penalties and interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.
“These can include financial hardship, actions of the CRA such as delays, extraordinary circumstances such as illness, and other circumstances outside the taxpayer’s control,” the agency spokesperson said.
Singh, who has spent more than a year fighting this case, is not expecting the Canada Revenue Agency to waive his additional tax obligation.
Singh says he is more frustrated by the unfairness of the situation than by the additional tax obligation.
“It’s not a matter of the [money],” said Singh. “It’s a matter of justice.”
Editor’s note: An earlier version of this article said Singh is required to pay nearly $13,000 in additional income tax. In fact, he will pay nearly $15,000 in additional tax.
I don’t understand this. The CRA site states: Generally, you can request a change only to a tax return for any of the 10 previous calendar years. For example, if you make a request in 2024, it must relate to the 2014 or later tax returns. So why can’t he just ask for an amendment? It seems to me he has until 2029.