Canada Revenue Agency (CRA), under provisions of the Income Tax Act that are usually referred to as “Taxpayer Relief”, has the discretion to waive any or all amount of penalties and interest. The provisions can protect a taxpayer who is unable to meet their tax obligations due to circumstances beyond their control. However, this comes with conditions.
Who can qualify?
To apply to have penalties and interest cancelled or waived, you need to explain why you are asking for this relief. The following are common situations:
1. Extraordinary circumstances
Extraordinary circumstances may include, but are not limited to, the following examples:
- natural or human-made disasters, such as a flood or fire
- civil disturbances or disruptions in services, such as a postal strike
- serious illness or accident
- serious emotional or mental distress, such as death in the immediate family
2. Financial hardship
When we have confirmed that you are not able to pay what you owe, we may waive or cancel interest in whole or in part to allow you to pay your account. For example, this may occur when:
- loss of work causes you financial hardship and you cannot pay
- interest charges make up a major amount of what’s due and you are unable to make a payment arrangement
- for individuals, paying the interest would make it difficult to provide basic necessities, such as food, medical help, transportation, or shelter
- for businesses, paying the interest would jeopardize the continuity of business operations, employees’ jobs, and the welfare of the community as a whole
3. Actions by the CRA
The CRA may cancel or waive penalties and interest when they result from CRA actions, including:
- processing delays that result in you not being informed within a reasonable time, that an amount was owing
- errors in CRA materials which led you to file a return or make a payment based on incorrect information
- incorrect information provided to you by the CRA
- errors in processing
- delays in providing information, resulting in you not being able to meet your tax obligations on time
- undue delays in resolving an objection or an appeal, or in completing an audit
4. Other circumstances
The CRA may also grant relief if your circumstances do not fall within the situations described above. Send us an application to have your penalties and interest cancelled or waived. Once we review your application, we will be able to determine if your circumstances can be considered for relief.
Penalties and interest from the past 10 years
The CRA’s discretion to grant relief is limited to any period that ends within 10 calendar years before the year in which a relief request is made.
For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to a penalty for a tax year or fiscal period ending in 2013 or later.
For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to interest that accrued in 2013 or later.
How can you apply?
Taxpayer relief requests can be made online using the CRA’s My Account, My Business Account (MyBA), or Represent a Client digital services:
- My Account: After signing in, select “Accounts and payments,” then “Request relief of penalties and interest”
- MyBA or Represent a Client: After signing in, on the MyBA overview page, select the appropriate program from the navigation menu, then select the correct account. Finally, select “Request relief of penalties and interest” under the “Request” heading
You can also fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties and Interest, and send it with one of the following ways:
- online with My Account: select “Submit documents” under the “Correspondence” section
- online with MyBA or Represent a Client: select “Submit documents” from the banner at the top of the page
- by mail to the designated office, as shown on the last page of the form, based on your place of residence
Conclusion
Note that outstanding taxes cannot be waived. CRA has discretion to eliminate penalties and interest, but not tax. If you think a taxpayer-relief application is right for you and want to increase your odds of success, consult expert Canadian tax accountants at Duffin Martin Tax & Accounting, Surrey, BC.