What is a Request for Taxpayer Relief from Penalties & Interest?
If a taxpayer is unable to pay penalties and interest they can ask Canada Revenue Agency (“CRA”) to cancel or waive both through the submission of a Taxpayer Relief Request. This is applicable when the following types of situations prevent a taxpayer from meeting their tax obligations:
actions of the CRA;
inability to pay or financial hardship;
CRA has the ability to provide relief pursuant to subsection 220(3.1) of the Income Tax Act, RSC 1985, c 1 (5th Supp), which states as follows:
Waiver of penalty or interest
(3.1) The Minister may, on or before the day that is ten calendar years after the end of a taxation year of a taxpayer (or in the case of a partnership, a fiscal period of the partnership) or on application by the taxpayer or partnership on or before that day, waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by the taxpayer or partnership in respect of that taxation year or fiscal period…
What is the Procedure?
The request must be made within 10 years of the tax year at issue. A detailed request should be submitted to CRA with the official CRA form RC4288 Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. An expertly prepared request will include all of the relevant facts with specific reference to the policy, legislation and case law (decisions of the Tax Court of Canada). It is important to review the case law to determine if relief has been granted under similar circumstances and to ensure the CRA decision maker is made aware of same.
If the initial application fails, a second request can be submitted for further review. Also, taxpayers can apply to the Federal Court for Judicial Review of CRA’s decision.
Further Requests for Relief under the Income Tax Act
A taxpayer can also request to amend, revoke or extend the deadline for filing certain elections. Pursuant to subsection 220(3.2), CRA can extend the filing deadline for certain elections or allow the taxpayer to amend or withdraw the election. For example, an election to adjust the cost base of a property.
Also, if in a certain year a taxpayer is eligible for a tax refund, it is important that they file the respective tax return within 3 years. If the return has not been filed by the deadline, upon request CRA can allow a late filing, up to 10 years, and the taxpayer will receive the refund. CRA’s authority to do so arises per subsection 164(1.5)(a) of the Income Tax Act.
Finally, CRA may also, with the taxpayer’s consent, assess beyond the normal 3-year assessment period for a refund or reduction in tax payable.
The Taxpayer Relief Provisions of the Income Tax Act, and related CRA policy and case law, are substantial. An expertly prepared request will greatly enhance your chances of success.
Contact us for free consultation. We will review your facts and outline the steps necessary to resolve your tax problem.