The Canada Revenue Agency sometimes uses a basis of accounting known as net worth to assess, calculate and issue assessments against certain taxpayers.
The net worth basis of accounting consists of determining the amounts a taxpayer would have omitted to report, by proceeding with an analysis of his assets, year after year.
Even if a taxpayer’s objection is denied by objections officers of Canada Revenue, he still has the right to appeal to the Tax Court of Canada.
When a taxpayer is in disagreement with an assessment issued by taxation authorities, he has the right to contest such assessment before the administrative courts of the various taxation authorities. It is sort of an administrative appeal.
When a taxpayer neglects to file his income and/or other tax returns, taxation authorities issue arbitrary assessments based on existing data that is more or less accurate.
While taxation authorities have full powers to issue arbitrary assessments, it appears that such assessments are often wrong and higher, in favour of such taxation authorities.
In such case, it is in a taxpayer’s best interest to immediately file the missing returns and undertake the necessary discussions in order to remedy the situation.