CRA Audit Reassessment: Should You Pay, Fight, or Negotiate? + CRA Reassessment Options Canada: How to Respond Strategically and Avoid Overpaying

When CRA issues a reassessment — whether from an audit, missing slips, net-worth review, GST/QST verification, payroll audit, or lifestyle analysis — taxpayers often feel confused or pressured to pay immediately. But a reassessment is not final unless you accept it. Every taxpayer has rights to dispute, negotiate, appeal, or restructure evidence to reduce tax, penalties, and interest. Some reassessments are correct, but many contain errors, assumptions, or incomplete information. This guide explains how to evaluate your reassessment, when to fight it, when to negotiate, and when paying is the best option.

Why CRA Issues Reassessments
Reassessments happen when CRA believes:
income was underreported
expenses were overstated
GST/QST ITCs were denied
vehicle or home-office claims were unreasonable
crypto ACB calculations were missing
real estate profits were misclassified
bank deposits exceeded reported income
foreign slips were missing
CRA often reassesses based on assumptions, not facts — especially in cash-based industries, crypto trading, assignment sales, and net-worth audits.

Step 1: Read the Reassessment and CRA’s Explanation
A reassessment will include:
the changes CRA made
the reasons for the changes
new tax, penalties, and interest
the deadline to file an objection
You have 90 days to file a Notice of Objection. Missing this deadline limits your options drastically.

Step 2: Identify the Type of Reassessment
Different reassessments require different strategies:
income underreporting (bank deposit method, net-worth method)
GST/HST or QST verification
cryptocurrency trading audits
rental property reassessments
vehicle and home-office denial
real estate business-income classification
shareholder-benefit assessments
director’s liability assessments
Each type of reassessment requires specialized evidence.

Step 3: Determine the Strength of Your Case
A CPA must analyze:
what documentation exists
whether CRA misinterpreted evidence
how the auditor calculated income
whether assumptions are reasonable
if the law was misapplied
Many reassessments can be overturned with proper evidence and expert analysis.

Step 4: Decide Whether to Pay, Fight, or Negotiate
You have three main options:

1. Pay Now (If CRA Is Correct)
   Choose this if:
   the reassessment is accurate
   you agree with CRA’s math
   documentation is missing and cannot be reconstructed
   tax amount is small
   Paying early reduces interest.

2. Fight the Reassessment (If CRA Is Wrong)
   File a Notice of Objection if:
   CRA misinterpreted information
   the auditor made assumptions
   CRA denied expenses without reason
   GST/QST was misapplied
   crypto ACB was ignored
   real estate intent was misunderstood
   objections must include structured evidence, legal arguments, and analysis.

3. Negotiate a Settlement
   Negotiation is possible when:
   CRA’s case is weak
   evidence contradicts assumptions
   documents exist but need organization
   partial agreement benefits both sides
   Settlement avoids the cost and time of full litigation.

Step 5: Understand CRA Timelines
90 days → deadline to object
1 year + 90 days → late-objection extension deadline
CRA Appeals review → may take months or years
Tax Court appeal → 90 days after Notice of Confirmation
Missing deadlines means the reassessment becomes final.

Step 6: When to Take the Case to Tax Court
Tax Court is recommended when:
CRA relies on assumptions
crypto transactions were misunderstood
bank deposits were incorrectly treated as income
real estate sales were labeled as business income
GST/QST ITCs were denied on technicalities
vehicle expenses were denied without reviewing logs
Tax Court is independent and often overturns CRA decisions.

Step 7: Should You Pay the Amount While You Fight?
Paying early:
reduces interest
avoids collections
but does NOT weaken your objection or appeal
If cash flow allows, paying protects you from aggressive CRA collectors.

Step 8: CRA Collections During Disputes
CRA can:
freeze bank accounts
garnish wages
seize GST refunds
take from future tax refunds
UNLESS your objection is filed — then most collections stop.

Step 9: When Negotiation Produces the Best Results
Negotiation may produce reductions in:
penalties
gross-negligence penalties
income adjustments
GST/QST adjustments
Many CRA disputes settle for less than 100 percent of the reassessed amount.

Step 10: When Paying Is the Best Strategy
Paying may be best if:
the reassessment is factually correct
documentation cannot be recovered
legal fees exceed the benefit
your time is better spent avoiding future issues
In these cases, the focus becomes payment plans and interest relief.

Why CRA Reassessments Are Often Wrong
CRA reassessments are frequently overturned because:
auditors rely on assumptions
crypto wallet transfers are mistaken for income
real estate investors are labeled as flippers
rental expenses are misclassified as capital
shareholder loans are misunderstood
GST/QST input claim rules are misapplied
CRA uses automated audit tools that produce false positives.

Common Cases Where Fighting CRA Works
crypto ACB reconstruction
GST/QST ITC recovery
real estate capital-gain treatment
vehicle logs proving business use
rental-property expense documentation
overturning director’s liability assessments
These cases win regularly when handled by a CPA.

Mackisen Strategy
Mackisen CPA Montreal evaluates CRA reassessments, determines whether paying, fighting, or negotiating is best, rebuilds missing evidence, files objections, manages Appeals, prepares Tax Court appeals, and negotiates settlements with CRA Legal. We ensure taxpayers never overpay or accept unfair reassessments.

Real Client Experience
A Montréal contractor cut a $68,000 reassessment to $19,000 after Mackisen challenged CRA’s assumptions. A real estate investor overturned a business-income classification. A crypto trader reversed a reassessment after proving wallet transfers were not income. A GST audit settled at less than half the original amount after proper documentation.

Common Questions
Is a reassessment final? No — you have full rights to object and appeal.
Should I pay before appealing? Yes if you want to reduce interest.
Can CRA collect while I object? Mostly no.
Do most reassessments settle? Yes.
Do I need a CPA? Absolutely — CRA disputes require expert evidence.

Why Mackisen
With over 35 years of combined CPA experience, Mackisen CPA Montreal helps taxpayers reduce reassessments, avoid penalties, negotiate settlements, and win disputes against CRA. We build evidence-driven strategies that protect your income and your rights.