The Canada Revenue Agency (“CRA”) offers a relief program for taxpayers facing interest and penalties. Individuals and businesses that have personal income tax, corporate income tax, GST/HST, or other federal tax obligations may qualify.
Situations That May Qualify for Relief
The following are the general categories of circumstances that may qualify for relief:
- Financial Hardship: Tax relief could be available for taxpayers experiencing severe financial difficulty who are unable to make reasonable payments or afford basic necessities. Businesses may qualify if interest charges threaten operations, jobs, or community welfare.
- Extraordinary Circumstances: Situations that may qualify for relief include natural disasters, serious illnesses/accidents, severe emotional/mental distress (e.g., death of an immediate family member), civil disturbances, or service disruptions (e.g., postal strikes). Sometimes, the CRA will issue news releases for widespread adverse events, but taxpayers must still request formal relief.
- CRA Errors or Delays: The CRA may waive penalties and interest if they result from CRA actions, including errors in published material or information, processing mistakes, or delays in processing returns, providing information, or resolving disputes
- Other Circumstances: The CRA may consider circumstances that do not fall into the three categories above. For example, exceptional situations may apply where an error was made by a third party (e.g., a representative or tax preparer).
It is important to note that meeting the criteria does not guarantee relief. Moreover, as per the Taxpayer Relief Provisions, a taxpayer has only 10 years from the end of each calendar year or fiscal period in which the interest and/or penalties accrued to request relief.
Applying for Relief
Taxpayers must submit a formal application outlining their situation when requesting a waiver of penalties and/or interest:
- Complete the Appropriate Form(s): Form RC4288 is generally the default form for requesting relief from penalties and interest. Selected listed financial institutions (“SLFIs”) must instead file Form RC7288 to request cancellation or waiver of GST/HST and/or QST penalties and interest. Both forms require taxpayers to provide personal/business details, list relevant tax years, provide a reason for the requested relief, and specify whether the taxpayer is applying for penalty, interest, or both types of relief. For requests made based on financial hardship, individual taxpayers should attach Form RC376 or a written statement of their financial situation.
- Gather Supporting Documents: Taxpayers must submit all relevant information, including basic account information (e.g., SIN, BN) and supporting documentation. Requests based on financial hardship should include income and expense statements or business records. Requests based on medical claims should include hospital records and/or doctors’ notes. Requests based on disaster claims should include insurance documents and/or news reports.
- Submit the Request: Individual taxpayers can submit their request online via CRA My Account and businesses can submit theirs through My Business Account. Alternatively, the form(s) may be mailed or faxed to the designated office indicated on the last page of the form for the taxpayer’s province or territory of residence.
Processing typically takes several months. Interest continues to accrue until the CRA reaches a decision, so taxpayers should consider making minimum payments or arranging a payment plan. Whether a taxpayer took reasonable care in managing tax affairs and acted quickly to correct any delay or omission can influence the CRA’s decision to grant relief.
Get Help Navigating the CRA Taxpayer Relief Process
Applying for a waiver of interest and/or penalties requires carefully crafted submissions. Taxpayer Law can assist with preparing the necessary submission. Contact Taxpayer Law today for a consultation.
We appreciate the contribution of Simran Mann in the development of this article.
