Taxpayer Relief Webinar - Cancel or waive penalties or interest

Questions and Answers

To ask for help under the taxpayer relief provisions:

  1. Fill out Form RC4288, Request for Taxpayer Relief. The form includes information to help you.
  2. Send the form and appropriate supporting documents to the Canada Revenue Agency (CRA), at the address on the form that corresponds to where you live.

For more information on interest and penalty relief, go to www.cra.gc.ca/taxpayerrelief.

Here are the answers to the questions you asked at the end of the webinar.

Q.1 My client was diagnosed with a serious illness and was not able to file the 2009 and 2010 income tax returns on time (due April 30, 2010, and April 30, 2011, respectively). My client's entire savings has been used to pay the tax bill for both years; however, for the 2011 tax year, my client is facing a $10,000 tax bill. This amount is due April 30, 2012, the filing due date of the 2011 income tax return. My client is not in a position to pay the $10,000 by the required due date. Is it possible to get some relief for my client because of the circumstances? 

Q.2 When preparing to file for the 2009 tax year in April 2010, there was one slip missing. I didn't receive the missing slip until late August 2010. Accordingly, I had to pay back the refund and was charged interest and a penalty. Do I qualify for relief from the interest & penalty?

Q.3 Does the interest relief apply to arrears balance only?

Q.4 How does the CRA determine if someone "knowingly allows" an arrears balance to exist?

Q.5 A taxpayer applied for relief in the fall of 2011. In January 2012, the taxpayer received a letter from the CRA stating an officer will be contacting them in 13 weeks. Is this the normal time line?

Q.6 When reviewing a small businesses request for relief from interest or penalties, are the liabilities considered or is only the businesses taxable income considered?

Q.7 Early last year, I requested relief from a penalty charge. I did not receive a reply from the CRA. What happened? 

Q.8 Are there different guidelines between waiving interest and cancelling interest that the webinar didn't touch upon?

Q.9 Can you file for taxpayer relief on an arbitrary assessment?

Q.10 What is the difference between "circumstances that are beyond a taxpayer's control", and "extraordinary circumstances"? Paragraph 25 of IC07-1 is confusing on this point.

Q.11 Please briefly explain the process or procedural difference regarding the waiver of interest or penalties under the Voluntary Disclosure Program, including when it would be advisable to use this process?

Q.12 What happens to the 10-year limit if the CRA does not make a speedy decision and the case drags into further periods?

Q.13 What is the process for requesting judicial review?

Q.14 Does judicial review require a lawyer or can the taxpayer self-represent?

Q.15 Can you apply for relief from interest or penalty charged as a result of the late filing of Form T2062 – Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property? 

Q.16 Will refund interest be paid on any resultant overpayment and a refund issued as a result of the cancellation of penalty and/or interest?

Q.17 Does the taxpayer have recourse rights when the Federal Court finds that the CRA delegate's taxpayer relief decision was reasonable and dismisses the application for judicial review?

Q.18 Are there publications available that explain the administrative guidelines used by the CRA when processing a taxpayer relief request?

Q.19 Why is the 10-year limitation period applied differently for interest versus penalty relief requests under subsection 220(3.1) of the Income Tax Act?

Q.20 When my client requested relief due to financial hardship, they were asked to provide financial information about their household/family, not just about themselves. Can you tell me why CRA needs to know that? 

Q.21 Who should a taxpayer contact when they cannot pay their taxes? 

Q.22 In what circumstances may a corporation request relief from interest and penalties due to an inability to pay and financial circumstances. 

Q.23 If I paid interest and penalties in full back in 2004 for the 2003 tax year, can I still ask for a review under the taxpayer relief provisions based on the circumstances of my situation? 

Q.24 What happens if a CRA representative gave me incorrect information over the telephone and it resulted in the assessment of interest and penalties? 

Q.25 Is relief only available to a taxpayer who has filed returns? 

Q.26 Where should a taxpayer send their taxpayer relief request? 

Q.27 If I submitted a letter for interest relief for late filing and a reply came back stating that mandatory documentation was missing, would my follow-up submission constitute a request for a second review? 

Q.28 Does a taxpayer's prior history of being a late filer or non-filer have an effect on their ability to obtain relief in an unrelated situation that prevented their ability to file on time?


Q.1 My client was diagnosed with a serious illness and was not able to file the 2009 and 2010 income tax returns on time (due April 30, 2010, and April 30, 2011, respectively). My client's entire savings has been used to pay the tax bill for both years; however, for the 2011 tax year, my client is facing a $10,000 tax bill. This amount is due April 30, 2012, the filing due date of the 2011 income tax return. My client is not in a position to pay the $10,000 by the required due date. Is it possible to get some relief for my client because of the circumstances?

A.1 Under the taxpayer relief provisions, your client might be eligible for relief, either in full or in part, from penalty or interest charges. In order for us to make this determination, we will need to review all the facts and circumstances of your client's case, including full disclosure of your client's financial situation.

Your client's request should be sent as soon as possible after receiving the notice of assessment for the 2011 income tax return. More details about the supporting documentation that must be included with a request for penalty or interest relief are on Form RC4288, Request for Taxpayer Relief.

Regarding the balance of tax owing, as soon as possible, your client should contact the Canada Revenue Agency (CRA) at 1-888-863-8657 to make payment arrangements.

Q.2 When preparing to file for the 2009 tax year in April 2010, there was one slip missing. I didn't receive the missing slip until late August 2010. Accordingly, I had to pay back the refund and was charged interest and a penalty. Do I qualify for relief from the interest & penalty?

A.2 To determine if your circumstances warrant relief from the interest or penalty charged, you need to submit a request for relief giving all the facts of your situation, including anything you did to get the missing information slip, or to correct or avoid this situation. Your request will be considered based on all the facts and circumstances you present. Also, your request will be considered using the four factors listed in paragraph 33 of Information Circular IC 07-1, Taxpayer Relief Provisions:

  1. whether or not the taxpayer has a history of compliance with tax obligations;
  2. whether or not the taxpayer has knowingly allowed a balance to exist on which arrears interest has accrued;
  3. whether or not the taxpayer has exercised a reasonable amount of care and has not been negligent or careless in conducting their affairs under the self-assessment system; and
  4. whether or not the taxpayer has acted quickly to remedy any delay or omission.

Q.3 Does the interest relief apply to arrears balance only?

A.3 No. We will consider a request for interest relief whether or not the associated arrears balance has been paid. Before submitting their relief request, taxpayers are encouraged to pay their account balance or to make a payment arrangement in situations where payment in full cannot be made.

Q.4 How does the CRA determine if someone "knowingly allows" an arrears balance to exist?

A.4 We review the account history for the tax year or reporting period in question, including all communication with the taxpayer about the outstanding balance.

Q.5 A taxpayer applied for relief in the fall of 2011. In January 2012, the taxpayer received a letter from the CRA stating an officer will be contacting them in 13 weeks. Is this the normal time line?

A.5 Under normal circumstances, when a request for interest or penalty relief is received, we will send an acknowledgement letter that provides an estimated processing timeframe based on the volume of requests at the time. The letter will also state that the processing time could vary depending on the particular circumstances of the case.

Q.6 When reviewing a small businesses request for relief from interest or penalties, are the liabilities considered or is only the businesses taxable income considered?

A.6 Yes, we consider the assets and liabilities of a small business. When reviewing a request for interest or penalty relief for a small business (for example, a sole proprietorship or partnership), the taxpayer's ability to pay will be determined based on our review of the assets and liabilities of both the individual (includes household) and business.

We will consider expenses and liabilities that are reasonable. We will also examine whether or not the taxpayer has been careful in carrying out their business and related tax obligations.

Q.7 Early last year, I requested relief from a penalty charge. I did not receive a reply from the CRA. What happened?

A.7 You can call us toll free to ask about the status of your request. For individual income tax enquiries, call 1-800-959-8281. For business and self-employed enquiries, call 1-800-959-5525.

Q.8 Are there different guidelines between waiving interest and cancelling interest that the webinar didn't touch upon?

A.8 For clarification, the term ‘cancel' refers to a penalty or interest amount that is assessed or charged for which relief is granted, in whole or in part, by the CRA; the term ‘waive' refers to a penalty or interest amount that is not yet assessed or charged for which relief is granted, in whole or in part, by the CRA.

With regard to the application of the taxpayer relief provisions, our general policy and guidelines about the waiver or cancellation of interest and penalties is essentially the same.

Taxpayer requests to waive interest or a penalty are less common than requests to cancel interest or a penalty. This is because waiver situations have to be identified when a return is filed, or before we assess or reassess the return.

Q.9 Can you file for taxpayer relief on an arbitrary assessment?

A.9 We normally require a taxpayer to file all outstanding returns, since there could be resulting credits to apply to a tax debt, thereby reducing or eliminating interest or a penalty. However, each request is reviewed on its own. In rare cases, we may accept a relief request for an arbitrary assessment.

Q.10 What is the difference between "circumstances that are beyond a taxpayer's control", and "extraordinary circumstances"? Paragraph 25 of IC07-1 is confusing on this point.

A.10 Penalties and interest may be cancelled or waived in whole or in part when they result from circumstances beyond a taxpayer’s control. Circumstances may include:

  • extraordinary circumstances
  • actions of the Canada Revenue Agency
  • inability to pay or Financial Hardship

Extraordinary circumstances that would prevent a taxpayer from making a payment when due, filing a return on time , otherwise complying with their tax obligations, may include, but not limited to the following:

  • natural or human-made disasters, such as a flood or fire;
  • civil disturbances or disruptions in services, such as a postal strike;
  • serious illness or accident; and
  • serious emotional or mental distress, such as death in the immediate family.

Circumstances do not have to be extraordinary to warrant relief. Relief may be granted because the circumstances that resulted in the application of penalties or interest are considered beyond a taxpayer's control, such as actions of the CRA and inability to pay or financial hardship.

Examples:

  • A taxpayer requests relief of a late remitting penalty due to an unreasonable delay in the mail delivery services, as the tax remittance was mailed within sufficient time for the CRA to receive it on or before the due date.
  • A taxpayer requests relief of the arrears interest charged for additional tax owed on an increase in taxable benefits from a stock option plan due to the employer's mistake in calculating the taxable benefit amount that was reported on the original T4 information slip.

Each request for taxpayer relief will be reviewed and decided on its own merits taking into consideration all the factors of the case.

Q.11 Please briefly explain the process or procedural difference regarding the waiver of interest or penalties under the Voluntary Disclosure Program, including when it would be advisable to use this process?

A.11 The Voluntary Disclosures Program (VDP) allows taxpayers to come forward to correct information that is not accurate or complete, and to disclose information to the Canada Revenue Agency (CRA). If taxpayers make a valid disclosure, they may avoid being penalized or prosecuted.

The main focus of the VDP is on the waiver of penalties that have not yet been assessed and the protection from possible prosecution related to the information being disclosed by the taxpayer.

The taxpayer relief provisions enable the CRA to administer the income tax system fairly and reasonably by helping taxpayers who are unable to meet their tax obligations due to personal misfortune or circumstances beyond their control by allowing the minister of national revenue (the minister) to cancel or waive penalties or interest. Situations that may warrant relief from penalties or interest include, but are not limited to, extraordinary circumstances, actions of the CRA, and inability to pay or financial hardship. The CRA may also grant relief if a taxpayer's circumstances do not fall within the situations described.

For more information about the type of relief provided under the Voluntary Disclosures Program, go to www.cra.gc.ca/voluntarydisclosures.

Q.12 What happens to the 10-year limit if the CRA does not make a speedy decision and the case drags into further periods?

A.12 Some taxpayers or registrants may be involved in a tax process with us (for example, an audit, objection, or appeal) for a tax year that goes beyond the 10-year limit. In these situations, some taxpayers or registrants might not be certain if they need taxpayer relief. In such cases, a request for potential relief should be submitted before the deadline. Information not provided at that time can be sent later.

In November each year the CRA issues a news release reminding all taxpayers and registrants about the deadline for filing a taxpayer relief request. Our reminder is also directed at those taxpayers or registrants who may be involved in a tax process with the CRA, including those who might not be sure if they need taxpayer relief in their situation.

Within the Acts administered by the CRA that contain taxpayer relief provisions, there is no authority to extend the 10-year deadline for requesting taxpayer relief.

Q.13 What is the process for requesting judicial review?

A.13 If you disagree with a CRA decision, you can apply for judicial review of that decision to the Federal Court within 30 days of the date you received the decision.

To apply for judicial review, you have to send a completed Form 301, Notice of Application, with the appropriate filing fee to the registrar of the Federal Court. For more information about how to file an application for judicial review or for general enquiries about judicial reviews, please visit the Courts Administration Services Web site.

It may be determined by the Court that the CRA did not properly exercise its discretion. If so, although the Federal Court cannot change a CRA decision, the Court can refer a decision back to the CRA to be considered by another delegated official.

Q.14 Does judicial review require a lawyer or can the taxpayer self-represent?

A.14 A taxpayer can be self-represented at a judicial review before the Federal Court.

For information about bringing a matter before the Federal Court, go to Information for litigants.

Q.15 Can you apply for relief from interest or penalty charged as a result of the late filing of Form T2062 – Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property?

A.15 Yes, you can ask for relief from a penalty or interest charged for filing Form T2062 late.

Q.16 Will refund interest be paid on any resultant overpayment and a refund issued as a result of the cancellation of penalty and/or interest?

A.16 Yes, when there is an overpayment as a result of the cancellation of a penalty or interest, refund interest is payable starting on the 31st day after the date of the receipt of the taxpayer relief request, and will be issued to the taxpayer.

Q.17 Does the taxpayer have recourse rights when the Federal Court finds that the CRA delegate's taxpayer relief decision was reasonable and dismisses the application for judicial review?

A.17 Yes, under the Federal Courts Act, the taxpayer can file a notice of appeal with the Federal Court of Appeal, within 30 days of the date of the judgment by the Federal Court on the judicial review application.

Q.18 Are there publications available that explain the administrative guidelines used by the CRA when processing a taxpayer relief request?

A.18 Yes, the administrative guidelines that we apply for the cancellation or waiver of a penalty or interest are in Information Circular IC 07-1, Taxpayer Relief Provisions. 

For the cancellation or waiver of a penalty or interest related to GST/HST under the Excise Tax Act, see GST/HST Memorandum 16.3, Cancellation or Waiver of Penalties and/or Interest.

Q.19 Why is the 10-year limitation period applied differently for interest versus penalty relief requests under subsection 220(3.1) of the Income Tax Act?

A.19 Based on the Federal Court of Appeal (FCA) decision rendered in Bozzer v. CRA, effective June 2, 2011, we have changed the way we administer the 10-year time limit for interest relief requests for tax debts that are more than 10 years old.

Based on the FCA decision, the discretion of the Minister of National Revenue allows for the cancellation or waiver of interest that accrues during the 10 calendar years that precede the calendar year in which a request for relief is made regardless of the tax year in which the debt arose.

As for relief from penalties, a taxpayer has 10 years from the end of the calendar year in which the tax year or fiscal period at issue ended to make a request for relief.

Q.20 When my client requested relief due to financial hardship, they were asked to provide financial information about their household/family, not just about themselves. Can you tell me why CRA needs to know that?

A.20 Just as we do when considering a payment arrangement with a taxpayer, we ask for full financial disclosure when considering a request for relief. The financial position of the household or family unit is needed to determine a taxpayer's ability to pay or borrow, as well as their foreseeable financial situation.

Q.21 Who should a taxpayer contact when they cannot pay their taxes?

A.21 A taxpayer should contact the CRA's Revenue Collections at 1-888-863-8657 to discuss payment arrangements. Revenue Collections is responsible for all actions taken to collect balances owing.

Q.22 In what circumstances may a corporation request relief from interest and penalties due to an inability to pay and financial circumstances.

A.22 A corporation may be experiencing extreme financial difficulty, and paying interest might jeopardize the continuity of its operations and the employment of its employees. If so, we may consider providing interest relief.

We would not generally consider cancelling a penalty based on an inability to pay or financial hardship, unless an extraordinary circumstance prevented compliance or there was an exceptional situation. For example, similar to the interest consideration above, when a corporation is experiencing extreme financial difficulty and enforcement of such penalties would jeopardize the continuity of its operations, the jobs of its employees, and the welfare of the community, we may consider relief from the penalties.

Q.23 If I paid interest and penalties in full back in 2004 for the 2003 tax year, can I still ask for a review under the taxpayer relief provisions based on the circumstances of my situation?

A.23 Yes. As long as your request is submitted within the 10-year limitation period, we will consider your request for interest and penalty relief, whether or not the amounts have been paid.

Q.24 What happens if a CRA representative gave me incorrect information over the telephone and it resulted in the assessment of interest and penalties?

A.24 You should submit a request to us for relief from interest and penalties, and include the supporting details of the incorrect information that we gave. That information could be in the form of written answers or part of a publication. If the incorrect information was verbal, you should provide details of the conversation, such as the date and time, as well as the name and/or identification number of the CRA official you spoke with.

To send us your request, we recommend that you use Form RC4288, Request for Taxpayer Relief. In addition to information about where to send your request, Form RC4288 provides instructions and examples of supporting documentation to include with your request.

Q.25 Is relief only available to a taxpayer who has filed returns?

A.25 A request for relief should be made as soon as possible after the taxpayer receives their notice of assessment or reassessment. In rare cases, we may accept a relief request for an assessment by us under subsection 152(7) of the Income Tax Act, sometimes referred to as an arbitrary assessment.

Taxpayers who have never filed tax returns may want to avail themselves of the CRA's Voluntary Disclosures Program (VDP). The VDP allows taxpayers to come forward to correct information that is not accurate or complete, and to disclose information they have not reported during previous dealings with the CRA. If taxpayers make a valid disclosure, they may avoid being penalized or prosecuted.

The main focus of the VDP is on the waiver of penalties that have not yet been assessed and the protection from possible prosecution related to the information being disclosed by the taxpayer.

For more information about the type of relief provided under the Voluntary Disclosures Program, go to www.cra.gc.ca/voluntarydisclosures.

Q.26 Where should a taxpayer send their taxpayer relief request?

A.26 Taxpayers or their authorized representatives should send written requests by mail, marked "taxpayer relief," to the applicable CRA intake centre. Intake centre addresses are on Form RC4288, Request for Taxpayer Relief. 

Q.27 If I submitted a letter for interest relief for late filing and a reply came back stating that mandatory documentation was missing, would my follow-up submission constitute a request for a second review?

A.27 No. As long as you provide the missing documentation to us within a reasonable time frame, we will consider your submission as part of the first review.

Q.28 Does a taxpayer's prior history of being a late filer or non-filer have an effect on their ability to obtain relief in an unrelated situation that prevented their ability to file on time?

A.28 Previous compliance history is one of many factors that we consider in a review. All the reasons, facts, and circumstances presented by a taxpayer will be considered in making a decision.

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: