When You Can’t Meet Your Tax Obligations – The CRA’s Taxpayer Relief Program

As it usually does when a natural disaster occurs, the Canada Revenue Agency (CRA) issued a press release, reminding affected taxpayers that they could seek relief from any interest and penalties which might otherwise be imposed as the result of late filing or payment of taxes.

Such relief is provided under the federal Taxpayer Relief Program and, although natural disasters are the most publicized instances in which the Program is utilized, it is in fact available to all Canadian taxpayers in a variety of circumstances.

The one commonality to all those circumstances is that the taxpayer has been prevented, due to circumstances beyond the individual’s control, and through no fault of his or her own, from meeting his or her tax obligations. Taxpayers who are eligible for the Program can have any interest and penalty charges which would otherwise be imposed for such failure waived. But, it’s important to note that it is only interest and penalty charges which are waived – the Minister has no authority, no matter how dire the taxpayer’s circumstances, to waive the payment of actual taxes owed.

The circumstances in which the Taxpayer Relief Program might apply range from a natural (or man-made) disaster, personal or family illness or death, or significant financial hardship. No matter what the reason for the need for relief, the process by which a request for such relief is made is the same.

The CRA issues a prescribed form – RC4288, Request for Taxpayer Relief, which can be found on the CRA website, and which can be used to file an application for relief. While use of the prescribed form isn’t mandatory – a letter to the CRA will suffice – using that prescribed form will ensure that all of the required information is included and that it is clear to the CRA that a request for relief is being made. For each request filed, the following information must be provided:

• the taxpayer’s name, address, and telephone number;
• the taxpayer’s social insurance number (SIN), account number, partnership number, trust account number, business number (BN), or other identification number assigned by the CRA;
• the tax year(s) or fiscal period(s) involved;
• the nature of the costs for which relief is requested, whether interest or penalty charges, or both, and the amounts involved;
• the facts or reasons supporting the belief that the imposition of interest or penalty charges were mainly caused by factors beyond the taxpayer’s control;
• an explanation of how the circumstances affected the taxpayer’s ability to meet his or her tax obligations;
• the facts and reasons supporting the inability to pay the penalties or interest assessed or charged;
• any relevant documents; and
• a complete history of events, including any measures taken (for instance, payments and payment arrangements) to resolve the non-compliance, and when they were taken.

If the reasons for the taxpayer’s inability to meet his or her tax obligations include financial hardship, the taxpayer must make a full financial disclosure, including statements of income and expenses. There is a form provided by the CRA  – Form RC376, Taxpayer Relief Request – Statement of Income and Expenses and Assets and Liabilities for Individuals, which can be used in such circumstances. That form can be found on the CRA website.

All relief requests must be sent to the Tax Processing Center which serves the area where the taxpayer lives. A listing of the addresses of all such Centres is available on the CRA website and that listing is also included as part of Form RC4288. Taxpayers who have registered for the CRA’s online service My Account can submit their relief request online.

Once received, each relief request is assigned to a CRA official who may, if necessary, contact the taxpayer to obtain clarification of the information provided or to seek additional information. Once all the needed information is submitted, a determination will be made of whether the taxpayer’s request for interest and/or penalty relief is to be approved in full, approved in part, or denied. That determination will take into account the following factors:

• the taxpayer’s history of compliance with his or her tax obligations;
• whether or not the taxpayer knowingly allowed an arrears balance to exist upon which arrears interest has accrued;
• whether or not the taxpayer exercised a reasonable amount of care in conducting his or her tax affairs, and whether or not negligence or carelessness has been demonstrated; and
• whether the taxpayer acted quickly to remedy any delay or omission.

Where the decision is made that full relief will be provided, that decision will be communicated to the taxpayer, without reasons. Where, however, the decision is to deny relief, or allow such relief only in part, the taxpayer will be given the reasons for such decision. Along with those reasons, the taxpayer will receive information on his or her options where the CRA has made a decision with which he or she does not agree.

More detailed information on the CRA’s Taxpayer Relief Program can be found on the Agency’s website.