A taxpayer-relief application (TPR or fairness application) remains a viable option for taxpayers with tax debts consisting of large interest or penalty amounts. A taxpayer-relief application may prompt the CRA to waive or cancel the interest or penalties on your tax bill. Generally, this sort of tax-debt relief is available only if a taxpayer faced an extraordinary circumstance, a setback caused by the CRA, or financial hardship
On August 28, 2018, the Canada Revenue Agency issued a news release acknowledging that the CRA would consider taxpayer-relief applications from Canadians affected by recent wildfires in British Columbia and Ontario:
- Natural disasters cause hardship for Canadians whose primary concerns in such times are for their families, homes, businesses, and communities
- To lessen the burden on Canadians who are dealing with the effects of wildfires, including those in British Columbia and Ontario, the CRA reminds them that they may have access to taxpayer relief when natural disasters occur
- Many individuals, businesses and first responders may be unable to file or pay their taxes on time. The CRA encourages them to ask for taxpayer relief. ... The CRA will consider requests on a case by case basis
The CRA's ability to entertain a taxpayer-relief application comes from subsection 220(3.1) of the Income Tax Act. This subsection permits the Canada Revenue Agency to waive or cancel a taxpayer's interest or penalty that accrued within the last 10 years
Subsection 220(3.1) of the Income Tax Act & The CRA's Discretion to Waive Penalties and Interest
Income Tax Act subsection 220(3.1) empowers the Canada Revenue Agency to waive or cancel a taxpayer's interest or penalty. The CRA may cancel these amounts either at will or on the taxpayer's request. The Canada Revenue Agency cannot, however, cancel an amount that arose more than 10 calendar years ago. Beyond this, the Income Tax Act doesn't offer any specific conditions that a taxpayer must meet to qualify for relief under subsection 220(3.1).
The Canada Revenue Agency's publications, however, explain how the CRA will apply subsection 220(3.1) under specific remedial programs, like taxpayer relief and the Voluntary Disclosures Program (VDP). Specifically, the CRA's Information Circular IC00-1R6 provides insight on the criteria for relief under the Voluntary Disclosures Program, and Information Circular IC07-1R1 describes the conditions for relief under a taxpayer-relief or fairness application
CRA Information Circular IC07-1R1: Defining the Scope & Requirements of the CRA's TPR Discretion
The CRA's Information Circular IC07-1R1 gives insight on the CRA's criteria for a successful taxpayer-relief application. Although it is not law, the Information Circular informs both taxpayers and CRA officials about when the Minister of National Revenue may give taxpayer relief
The Circular identifies three situations that warrant taxpayer relief:
- Extraordinary circumstances—e.g., a natural disaster, a postal strike, a serious illness, or a death in the immediate family;
- Actions of the CRA—e.g., processing delays or errors in the CRA's published material; and
- Inability to pay or financial hardship—e.g., payment of the accumulated interest results in extended inability to provide basic necessities
Still, these three situations aren't exhaustive. Paragraph 24 of the Circular clarifies that the CRA "may also grant relief even if a taxpayer's circumstances do not fall within the [three categories above]." The paragraph also explains that the Circular doesn't give the CRA "the authority to deny a request and exclude it from proper consideration simply because the taxpayer's circumstances do not meet [these categories]."
Yet the CRA rarely grants a taxpayer-relief application that doesn't evidence either an extraordinary circumstance, a setback caused by the CRA, or financial hardship
Tax Tips – Canadian Wildfires as a Basis for a Taxpayer-Relief or Fairness Application
The 2018 heat wave caused over 100 forest fires throughout Ontario and British Columbia. These wildfires affect not only the area residents but also the first responders toiling to extinguish the flames or treat those suffering from smoke inhalation
Those affected may qualify for the extraordinary-circumstances justification for taxpayer relief. In fact, Canada's Minister of National Revenue, the Honorable Diane Lebouthillier, agrees that the people dealing with the ramifications of the BC and Ontario wildfires "should not be penalized for filing and paying their taxes late."
But this doesn't assure a successful taxpayer-relief or fairness application. The Canada Revenue Agency is infamous for denying relief unless faced with a taxpayer-relief application demonstrating both a deliberately drafted narrative and legal tax savvy. An impulsive plea for tax relief rarely succeeds
If you think that you should qualify for taxpayer relief, and you wish to heighten your chances of success, consult one of our expert Canadian tax lawyers.