What is a Taxpayer Relief Application?
When taxpayers are unable to meet tax payment deadlines or fulfill their obligations due to personal misfortune or uncontrollable circumstances, the CRA typically imposes penalties and interest. Fortunately, subsection 220(3.1) of the Income Tax Act allows the CRA to waive penalties or interest at their discretion or upon the taxpayer’s request. This process, previously known as a fairness application, is now called Taxpayer Relief (TPR).
It’s important to note that the CRA cannot waive amounts that are more than 10 years old. Beyond this provision, the Income Tax Act does not specify detailed requirements for relief.
To bridge this gap, the CRA has issued Information Circular IC07-1R1, which serves as a guideline for both taxpayers and CRA officials on when relief might be granted.
Primary Situations for Taxpayer Relief
According to the Circular, the CRA typically grants taxpayer relief in three primary situations:
- Extraordinary Circumstances:
- Natural disasters
- Postal strikes
- Serious illnesses
- Deaths in the immediate family
- Actions of the CRA:
- Processing delays
- Errors in CRA’s published material
- Other mistakes made by the CRA
- Inability to Pay or Financial Hardship:
- If paying the accumulated interest results in an inability to afford basic necessities such as food, housing, or medical care
These categories are not exhaustive, meaning relief can be granted in other circumstances as well.
When is Taxpayer Relief Considered?
Relief based on extraordinary circumstances or CRA errors can be considered during the objection or appeal stage. However, if you seek relief based on financial hardship or other grounds, the CRA generally won’t consider the request until the objection or appeal is resolved.
This principle was highlighted in the Asare v. Canada (National Revenue) (2022 FC 1676) case. In this case, the taxpayer filed objections to reassessments and requested penalties be waived. The CRA’s appeals officer declined, suggesting the taxpayer file a formal relief request. The court ruled that the request was premature since no formal application had been made.
Pro Tax Tips – Submitting a Taxpayer Relief Request
- File the Request Early:
Submit a formal taxpayer relief request to the CRA’s Taxpayer Relief Division before resolving your objection or appeal. - Document Your Claim:
Ensure you provide detailed information supporting your claim for relief, especially if citing financial hardship. - Consult an Accountant:
Engaging an experienced accountant can help you navigate the process and improve your chances of success.
Frequently Asked Questions (FAQ)
What Situations Warrant Taxpayer Relief?
Relief is typically granted in these situations:
- Extraordinary Circumstances (e.g., natural disasters, illness, or death).
- CRA Errors or Delays (e.g., mistakes in processing or published information).
- Financial Hardship (e.g., inability to meet basic living expenses due to accumulated interest).
When is Taxpayer Relief Granted?
The CRA may grant relief during the objection or appeal stage for extraordinary circumstances or CRA errors. For other grounds, relief is typically granted after the objection or appeal is resolved.
This article is written for educational purposes.
Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.
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