Five Lessons on Tax Disputes for Canadian CPAs

If you are a Canadian CPA who wants to prevent your clients from having to face the stress and cost of a tax dispute with the CRA, or has a client facing a tax dispute, here are 5 things you need to know. These lessons come from my time working for the judges of the Tax Court of Canada and my 12 years specializing exclusively in helping individuals and businesses resolve tax disputes with the CRA.

1. Deadlines are crucial

One of the saddest situations we come across is when a taxpayer contacts us with a dispute and a strong argument, but they have already missed the deadline to file an objection or a notice of appeal.

Even if the taxpayer is 100% correct, if the deadline has passed to dispute a reassessment, there is often little we can do to eliminate the tax owing.

Once a notice of reassessment is issued, the taxpayer has 90 days to object. After that, there is a one-year grace period in which the CRA can allow an application for an extension of time to object. The same deadlines apply to filing an appeal to the Tax Court of Canada.

After the year and 90-day deadline has passed, the tax debt is final and, there is nothing we can do to force CRA to cancel the tax debt.

Filing a T1 or T2 Adjustment does not preserve a taxpayer’s entitlement to dispute a tax amount owing. So, when in doubt, file a notice of objection to preserve your client’s right to dispute.

Never miss a deadline.  

2. some tax disputes stand the test of time

There has been a lot that has changed in my years of representing taxpayers, but there are also certain types of tax disputes that happen repeatedly:

• Property flipping audits (HST and income tax)

• Net worth audits (restaurants, grocery stores, etc.)

• Director’s liability

• Section 160 assessments

• Gross negligence penalty disputes

• Denied input tax credits

• International audits

• Tax planning challenges

We have helped countless clients resolve these types of tax disputes with the CRA and I am sure we will be seeing them for many years to come. Every CPA should be familiar with these types of disputes so that they can help their clients avoid them.

3. keep the shareholder loan account pristine

Issues with a business’ shareholder loan account continues to be one of the primary triggers of large tax disputes. Business owners, however, rarely understand their shareholder loan account. So, they rely on their CPA to keep it in order.

I believe in good “shareholder loan account hygiene”, which includes refraining from using end of year netting-out adjustment entries. These types of entries are most commonly used when there is too much intermingling between the shareholder’s personal finances and those of the business.

If you find yourself making netting-out adjustment entries at the end of your client’s fiscal year, be sure to tell them about the risks of imprecise shareholder loan account.

For more information, watch my Tax Dispute Update from 2025.

4. cra requires principled settlements

Many clients come to us asking if we can negotiate their debt with the CRA. It is reasonable for them to think that we could call up the CRA and say something like, “Look, fighting this tax dispute is just going to cost a bunch of time and money for us and for you (the CRA). So, let’s just settle it down the middle.” Or, “Instead of a long, drawn out payment plan, how about you (CRA) agree to take 60% of my client’s debt and my client will cut you a cheque tomorrow?” But this is not how it works.

CRA officers are not entitled to negotiate in this way. They can only accept a “principled settlement”. This means that they can only come to an outcome that a judge would come to by applying the law. Instead of trying to negotiate with the CRA officer to cut the amount down the middle, we must bring forward evidence and arguments that will convince the CRA that, if we were to go before a judge, we would win on these specific issues.

The only time the CRA can negotiate an outcome that is not a principled settlement is when the taxpayer has entered the insolvency process.

Absent insolvency, we must make principled arguments to arrive at a settlement agreement. There are no shortcuts.

5. the client’s user experience matters

Our number one priority is to get our clients the best result possible.

But we also have a secondary responsibility to make the client’s experience throughout the tax dispute as positive as we possibly can.

Tax disputes are a nightmare. They are stressful, time consuming, and costly. But we do our best to reduce all that by giving our clients three things they want and deserve:

a) Confidence in us: This comes from us having strong testimonials and reviews, backed up by standard procedures, pre-existing resources (such as templates and instructional videos) we can share with clients, and a clear plan from the outset.

b) A simple and efficient experience: This includes how we communicate with the client, share information, and strategically allocate our time.

c) A sense of empowerment: This comes from us explaining how CRA arrived at their conclusions and providing the knowledge and explanations necessary for clients to make the informed decisions.

If your client is facing a large tax dispute, they deserve a user experience that meets the seriousness of the moment.