Skip Ribbon Commands
Skip to main content

You’ve Been Hit With Tax Interest and Penalties: Are You Eligible For Relief?

30/10/2013


Although the best way to avoid paying interest and penalties is to file and pay your taxes on time, there may be instances when the interest and penalties are a result of circumstances beyond your control. Depending on those circumstances, the Canada Revenue Agency (CRA) does have the ability to cancel or waive both interest and penalties under taxpayer relief provisions. A taxpayer has 10 years to make a request for relief if they feel that their situation is within these provisions.

Relief of Interest and Penalties

Although the CRA does not grant relief from interest and penalties easily, there are certain situations you may be granted relief. These include:

  • Extraordinary Circumstances – A situation that is beyond the taxpayer’s control which has prevented a taxpayer from complying with tax law. Examples include natural disasters, disruptions in services (such as a postal strike) or serious illness.
    If an extraordinary event has prevented a large number of taxpayers from meeting their tax obligations, the CRA may issue a news release announcing that special consideration will be given for relief. A written request will normally still be required.
  • Actions of the CRA – This refers to interest or penalties that arise primarily because of the CRA and through no fault of the taxpayer. Examples include processing delays that result in the taxpayer not being informed within a reasonable time that an amount was owing, errors in CRA material which misled a taxpayer in their filings or incorrect information provided to a taxpayer by the CRA.
  • Financial Hardship - An inability to pay amounts owing. Normally, consideration is not given unless an extraordinary circumstance prevented compliance or an exceptional situation exists. An example of when the CRA may cancel / waive the interest is when the payment of the accumulated interest would cause the taxpayer an inability to provide for the basic necessities of life (i.e. food, shelter, etc.)

Note that the above is not an exhaustive list and the CRA may grant relief in other circumstances, provided they are justified.

Factors the CRA May Consider

The CRA has indicated they will also consider the following factors in determining whether to accept a taxpayer’s request:

  • History of tax compliance;
  • Whether you had knowingly allowed the arrears balance to exist;
  • If there was a reasonable amount of care in conducting your tax affairs; and
  • The timeliness of the actions.

It is important to recognize that each decision is made at the discretion of CRA and they are not required to grant relief under the taxpayer relief provisions.

How to Make a Relief Request

Either taxpayers or their authorized representative (a third party such as an MNP Tax Specialist) should submit their requests by mail to the appropriate tax centre. This can be done in letter format, but the CRA recommends the usage of Form RC4288 – Request for Taxpayer Relief. This form provides instructions and examples of the supporting documentation you should submit with the request that support the validity of the claim The form can be found on the CRA website.

If a request has been made and denied, the CRA does allow the taxpayer the right to ask for their situation to be reviewed for a second time. In doing so, they will have the opportunity to submit additional documentation for CRA’s consideration.

If you do find yourself in one of the situations above and feel that you are within the taxpayer relief provisions, please feel free to contact your local MNP Tax Specialist for further guidance and we will be happy to help you out.