Tax Court of Canada: When and How to Take Your Tax Dispute to Court

Most tax disputes with CRA are resolved through the Notice of Objection process, but when CRA Appeals refuses to change the reassessment or when the stakes are too high, the next step is the Tax Court of Canada. Appealing to Tax Court is a taxpayer’s strongest legal remedy, offering a truly independent review — separate from CRA — to challenge incorrect assessments, penalties, GST/HST decisions, payroll rulings, director’s liability assessments, and more. This guide explains when to take a case to Tax Court, how the process works, which rules apply, and why professional representation is essential.

When You Should Appeal to the Tax Court

You should take your dispute to Tax Court when:
CRA Appeals has confirmed or only partially changed your reassessment
CRA refuses to reverse incorrect audit assumptions
the dispute involves large financial stakes
gross negligence penalties are applied
real estate flipping or business-income disputes remain unresolved
crypto or foreign-income issues are misunderstood by CRA
GST/HST assessments are excessive
CRA misclassified contractor vs employee
CRA denied Input Tax Credits (ITCs) without proper basis
CRA issued director’s liability assessments
The Tax Court is the final authority before the Federal Court of Appeal.

Deadlines for Filing an Appeal

You must file your Notice of Appeal:
within 90 days of CRA Appeals’ decision (Notice of Confirmation or Notice of Reassessment)
OR
within one year + 90 days of the original reassessment, if Appeals never responds
Missing the deadline means losing your legal right to challenge CRA.

Two Procedures at the Tax Court

1. Informal Procedure

For disputes under $25,000 per tax year (or $50,000 for GST/HST).
Benefits:
simpler
faster
less formal
Often used for:
small business disputes
single-year reassessments
disallowed expenses

2. General Procedure

For disputes over $25,000 per year or complex cases.
More formal, similar to civil litigation.
Includes:
pleadings
document discovery
examinations
expert testimony
legal briefs
General Procedure is required for large or technical issues such as crypto, real estate, foreign income, GST/HST, or payroll.

What You Can Appeal at the Tax Court

income tax reassessments
GST/HST assessments
denied ITCs
director’s liability
penalties (including gross negligence)
CPP/EI rulings
real estate reclassification
crypto taxation issues
foreign income disputes
capital gains vs business income
These issues often require expert evidence, accountants, and legal argumentation.

What You CANNOT Appeal

CRA service complaints
taxpayer relief decisions (interest cancellation)
voluntary disclosure denials
You may challenge these via Federal Court, not Tax Court.

How the Tax Court Process Works

Step 1: File a Notice of Appeal

Outline your disagreement, facts, and legal basis.

Step 2: CRA Legal Division Responds

They file a Reply defending CRA’s position.

Step 3: Discovery Phase

Exchange documents
Oral examinations under oath
Requests for admissions

Step 4: Settlement Discussions

Many cases settle before trial.

Step 5: Trial

Evidence presented
Witnesses examined
Legal arguments made

Step 6: Judgment

A judge issues a written decision, which CRA must follow.

What Evidence the Tax Court Considers

bank records
receipts and invoices
crypto logs and blockchain evidence
real estate records
emails and contracts
expert testimony
ACB calculations
loan and gift documentation
Business records, when organized properly, can overturn CRA assumptions.

How Tax Court Differs From CRA Appeals

CRA Appeals:
reviews the file administratively
focuses on documentation
may still rely on audit assumptions
Tax Court:
is independent
applies legal standards
requires CRA to prove its position
Taxpayers often win in Tax Court when CRA relied on weak assumptions.

Common Tax Court Cases

capital vs business income (flip cases)
denied ITCs
unreported income assumptions
crypto trading classification
vehicle and home office disputes
contractor reclassifications
GST/HST real estate rebates
foreign income disputes
director’s liability
Many of these involve complex financial analysis.

Why Representation Is Critical

Tax Court requires:
legal pleadings
evidence strategy
cross-examination
knowledge of the Income Tax Act and Excise Tax Act
expert accounting testimony
Self-representation is risky — errors can harm your case permanently.

When Settlement Is Better Than Trial

Settlements may be used when:
CRA’s position partially correct
taxpayer wants certainty
trial cost outweighs benefit
Many disputes are resolved through negotiated agreements before trial.

If You Lose at Tax Court

You may appeal to:
Federal Court of Appeal
Supreme Court of Canada (rare)
However, appeals require strong legal grounds.

Mackisen Strategy

At Mackisen CPA Montreal, we build litigation-ready cases by reconstructing financial records, providing expert testimony, challenging CRA’s assumptions with evidence, drafting legal arguments, and collaborating with tax lawyers for court representation. We prepare clients for every stage — from objection to Appeals to Tax Court.

Real Client Experience

A Montreal real estate investor won a Tax Court case after CRA wrongly classified her sale as business income. A crypto trader overturned a six-figure reassessment by proving accurate ACB calculations. A contractor defeated a CPP/EI ruling through worker-classification evidence. A corporation succeeded in reversing denied ITCs via expert documentation.

Common Questions

Do most cases go to trial? No — many settle. Can I represent myself? Yes, but risky. Does Tax Court stop CRA collections? Only when objections are filed. How long does a case take? Several months to years. Can CRA appeal a Tax Court decision? Yes.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps taxpayers escalate disputes to the Tax Court with strong evidence, expert accounting support, and coordinated legal representation — ensuring CRA’s assumptions are challenged at the highest level.