In some situations, taxpayers will find themselves unable to pay interest or penalties owing to the Canada Revenue Agency. Depending on the reason this happened, it is possible to request relief from CRA to have these amounts cancelled.
Taxpayer Relief
CRA recognized that some situations are beyond the control of a taxpayer. This can result in penalties being applied in situations that seem heartless. Fortunately, CRA does in fact have a heart.
If a taxpayer can show that the reason they were unable to file, or pay on time for example, were due to factors beyond their control, they can request relief from those penalties and interest that arise. These factors include things such as a natural or human-made disaster (fire, flood), serious illness or accident, and serious emotional distress, such as a death in the family.
Relief can also be requested for mistakes and delays caused by CRA.
Finally, a request can be made for financial hardship (a current inability to pay), although this request is much harder to have approved, and requires much more disclosure, as CRA generally considers tax owing to be an expense the taxpayer should plan for.
Filing Properly
As with all things the CRA does, it is important to properly request relief. If the request is made incorrectly, or does not ask for relief from the right things, and is disallowed by CRA, it will be much more difficult to go back later and re-request the same relief.
Concluding Thoughts
If you have found yourself in a situation where you have a large balance owing to CRA, making sure you take proper steps to resolve this payment as soon as possible is critical, as is ensuring the request is made properly.
Ian Edmonds is a CPA, CA and CPA (NC) working in Toronto with individuals, small and medium sized businesses, and not-for-profit organizations in Canada and the US to provide personalized, approachable tax and accounting advice and services and help people get caught up, and stay up to date.