CRA Arbitrary Assessment Reversal Calculator
When a corporation stops filing, the CRA assesses it anyway on an estimate that is deliberately high. Work out what the real tax should be, how much the CRA is currently collecting that it should not be, and the deadlines that still apply.
expected reduction
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The Real Tax Against the Notional Assessment
| Item | Basis | Per Year | All Years |
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The Deadlines That Still Apply
| Deadline | Statutory Basis | Where You Stand |
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The Order of Operations
| Step | What Happens |
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Points That Decide This
What to Do Next
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Disclaimer: Subsection 152(7) allows the Minister to assess tax without regard to a return, and to assess where no return has been filed. These notional or arbitrary assessments are estimates and are deliberately set high, since the corporation holds the information the CRA does not. The assessment is valid and collectable until it is displaced. Filing the actual return is the normal route to a reassessment on the real figures, and does not by itself require an objection. A notice of objection under subsection 165(1) must be served within 90 days of the mailing of the notice of assessment, and an application to extend that time under section 166.2 must be made within one year after the end of the 90-day period. Corporate tax is applied at the Ontario combined rates of 12.2% on active business income within the $500,000 small business limit, 26.5% at the general rate above it, and 50.17% on investment income before any refundable portion. The late filing penalty is 5% of the unpaid tax plus 1% per complete month to a maximum of 12 months, with higher rates where a demand to file was issued and there is a prior offence. Penalties and interest calculated on an overstated assessment come down proportionately when the assessment is corrected. Interest is modelled at the prescribed arrears rate of 8% compounded daily. This page is general information, not tax advice.
The Estimate Is High on Purpose
Subsection 152(7) lets the CRA assess a corporation without regard to any return, and to assess where no return has been filed at all. The figure is an estimate, usually built from GST/HST filings, T4 and T5 slips, prior years or industry averages, and it is set on the high side deliberately.
That is not an abuse. It is the mechanism working as intended. The corporation holds the information the CRA does not, and a high estimate is what finally produces the filing.
| Three Years Notionally Assessed | CRA Position | Real Position |
|---|---|---|
| Tax | $255,000 | $21,960 |
| Penalties and interest | $66,000 | Recalculated on the real tax |
| Total being collected | $321,000 | A fraction of it |
The assessment is valid and fully collectable until it is displaced. That is the part owners misread. Ignoring it does not make it provisional. The CRA can garnish receivables, freeze accounts and register a lien on an amount that everybody involved knows is not the real number.
Filing the Real Return Is the Fix
The objection is not the primary route. Filing the actual T2 with proper financial statements is, because the CRA will normally reassess on the filed return once it accepts the figures. That is a far shorter path than an appeals process.
The objection exists as a backstop, and it matters because it preserves your rights if the CRA refuses to reassess or takes a position on the numbers you disagree with. Where the 90-day window is still open, filing both the return and the objection costs very little more and removes the risk entirely.
Return first, objection as protection. An objection with no return behind it achieves nothing, because there is no alternative figure for anyone to consider. A return with no objection is usually enough, but it leaves you without a remedy if the CRA does not act.
The 90 Days and the Year After It
A notice of objection must be served within 90 days of the day the notice of assessment was mailed. That is the mailing date on the notice, not the day it was opened.
If the 90 days has passed, section 166.2 allows an application to extend the time, but only within one year after the end of the 90-day period. That gives a hard outer limit of 455 days from the assessment date, and it is not extendable beyond that under any circumstances.
| Days Since the Assessment | Position | What to Do |
|---|---|---|
| Under 90 | Objection window open | File the return and serve the objection |
| 90 to 455 | Extension application available | Apply under section 166.2 with the return |
| Over 455 | Objection route closed | File the return and request a reassessment directly |
Even past 455 days the position is not hopeless. Filing the return and asking the CRA to reassess still works in most cases, and subsection 152(4.2) permits a reassessment beyond the normal period in certain circumstances. It is simply no longer a right you can enforce.
The Penalties Come Down With the Tax
The late filing penalty is calculated as a percentage of the unpaid tax, so when the tax falls the penalty falls with it. The same applies to arrears interest, which is charged on a balance that was never actually owed at that level.
This is frequently the largest single component of the relief and owners rarely expect it. A corporation assessed $85,000 of tax that actually owed $7,320 does not simply save $77,680. It also sheds most of the penalty and interest that was stacked on the overstated figure.
Interest relief on the remaining balance is a separate application. Taxpayer relief under subsection 220(3.1) is available for up to ten calendar years and is decided on its own merits. It does not happen automatically when the reassessment issues.
What the CRA Does If You Keep Ignoring It
- Garnishment of receivables, served directly on your customers
- A requirement to pay issued to your bank, freezing the account
- A lien registered against corporate property
- Director liability for source deductions and GST/HST, which follows you personally
- Loss of the objection right once 455 days pass
- Compounding interest on a figure that was never real
What This Calculator Does Not Cover
- GST/HST notional assessments, which run on a separate account with their own deadlines
- Payroll assessments and the director liability that attaches to them
- Personal notional assessments issued to the shareholder at the same time
- Taxpayer relief applications on the remaining interest
- Provinces other than Ontario
- Capital cost allowance and loss carryforwards, which frequently reduce the real figure further
The number on the notice is not the number you owe, but it becomes collectable as if it were. Our unfiled returns and back taxes service covers the rebuild, the returns, the objection and the collections hold.
Frequently Asked Questions
Common questions on arbitrary and notional assessments.
Related Calculators and Guides
More tools for corporations behind on filings.
The Number on the Notice Is Not the Number You Owe
Send us the notices of assessment and whatever records exist, even if it is only bank statements. We will rebuild the years, file the returns, serve the objection where the window is open and ask collections for a hold while it happens.