Canadian taxpayers are entitled to apply to the Canada Revenue Agency for taxpayer relief of penalties and interest. All that is required is for a taxpayer who has been assessed to complete and submit an RC4288 form "Request for Taxpayer Relief – Cancel or Waive Penalties and Interest". This form can be used for goods and services tax ("GST") and harmonized sales tax ("HST") relief in addition to income tax.
The form is relatively simple – however, the devil is in the details. Section 2 is very important and any taxpayer seeking a significant amount of relief should take care in writing the reasons for the request for relief. We often prepare a separate document providing the facts and reasons why relief should be granted – we do not limit the written communication to the form. We also attach relevant documents to show transparency and openness.
It is important to understand that relief is not guaranteed. While the CRA has broad discretion to grant relief, they also have broad discretion to deny relief. The CRA provides limited information about when they will grant penalty and interest relief. The CRA indicates that the Minister of National Revenue may grant relief from penalty or interest when the following types of situations prevent a taxpayer from meeting their tax obligations:
- extraordinary circumstances:
Penalties or interest may be cancelled or waived in whole or in
part when they result from circumstances beyond a taxpayer's
control. Extraordinary circumstances that may have prevented a
taxpayer from making a payment when due, filing a return on time,
or otherwise complying with a tax obligation 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; and
- serious emotional or mental distress, such as death in the immediate family;
- actions of the Canada Revenue Agency
(CRA): The CRA may also cancel or waive penalties or interest when
they result primarily from CRA actions, including:
- processing delays that result in taxpayers not being informed, within a reasonable time, that an amount was owing;
- errors in CRA material which led a taxpayer to file a return or make a payment based on incorrect information;
- incorrect information provided to a taxpayer by the CRA;
- errors in processing;
- delays in providing information, resulting in taxpayers not being able to meet their tax obligations in a timely manner; and
- undue delays in resolving an objection or an appeal, or in completing an audit;
- inability to pay or financial
hardship: The CRA may, in circumstances where there is a
confirmed inability to pay amounts owing, consider waiving or
cancelling interest in whole or in part to enable taxpayers to pay
their account. For example, this could occur when:
- a collection has been suspended because of an inability to pay caused by the loss of employment and the taxpayer is experiencing financial hardship;
- a taxpayer is unable to conclude a payment arrangement because the interest charges represent a significant portion of the payments; or
- payment of the accumulated interest would cause a prolonged inability to provide basic necessities (financial hardship) such as food, medical help, transportation, or shelter; consideration may be given to cancelling all or part of the total accumulated interest; and
- other circumstances: The CRA may also grant relief if a taxpayer's circumstances do not fall within the situations described above.
The CRA is working to improve its procedures for dealing with Requests for Taxpayer Relief. When a completed form is filed with the supporting documentation, the CRA should send a letter to the requester acknowledging receipt of the Request for Taxpayer Relief. The file should be assigned to a CRA officer and the taxpayer should receive requests for relevant documentation (unless a full set of relevant documents is provided with the Request for Taxpayer Relief).
If the taxpayer gets a decision that is not favourable – it happens often – then there is the ability to request an impartial review of the CRA officer's decision by the CRA (not the same CRA officer who rejected the request).
If the review procedure ends in a rejection of the requested relief, it is possible to seek a review by the Federal Court of Appeal by way of a judicial review. However, judicial reviews often are an expensive legal procedure and can cost tens of thousands of dollars (even hundreds of thousands of dollars in some cases depending on the complexity of the issues). There have been judicial review applications filed and the Federal Court of Appeal has in some cases sided with the taxpayer.
I will be honest with you – the Request for Taxpayer Relief Program can be frustrating for persons seeking relief. That does not mean it is not worth the effort and one should not try. Just know that you may feel like you are still stuck in the mud while pursuing a process that may take time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.