Guest post by Frank Flynn
With the downturn in the economy, there’s no shortage of Canadians carrying major tax liabilities. Tax debts typically come with serious penalty and interest charges. Often enough taxpayers struggle along chipping away at a tax burden that never seems to diminish. Fortunately, the Income Tax Act allows taxpayers to apply for relief from penalty and interest charges. The Taxpayer Relief Provisions, section 220(3.1) of the I.T.A. enable individuals or businesses to request remission of penalties, arrears interest, and or waiver of currently accruing interest.
The legislation also enables taxpayers to request acceptance of late, amended, or revoked elections; as well as make requests for refunds or reductions in amounts payable that are beyond the normal 3 year statute barred period.
Getting relief from penalties and or interest, or acceptance of a statute barred reduction can often save folks huge money and make a life changing difference.
How to apply for tax relief?
Filing a Taxpayer Relief application requires the completion of an RC4288 form (available on the C.R.A. website) or submission of a letter outlining the specifics of your request. The legislation outlines separate categories for applying and very specific criteria under which the Agency will grant relief. The categories for relief are: Financial Hardship, Extraordinary Circumstances, and Actions of the C.R.A. The decision-making criteria used for determining who will be granted relief are: Taxpayer’s history of compliance, whether the taxpayer knowingly allowed interest to accrue on a debt, whether the taxpayer exercised reasonable care and was not negligent in conducting their affairs, and, whether or not the taxpayer acted quickly to remedy any delay or omission.
Although the categories and decision-making criteria appear fairly straightforward, the adjudication process can be somewhat counter-intuitive. Very often the thing you think will get you relief is in fact the very thing that will disqualify you. For example, taxpayers often request relief on the basis that their accountant or bookkeeper was late filing their return or made filing errors. The narrative usually runs along the lines of, ‘it wasn’t my fault so I shouldn’t have to pay the penalty and interest.’ Big mistake. The legislation explicitly states, “Taxpayers are generally considered to be responsible for errors made by third parties…” This is just one of many trapdoors that can scupper your chances if you haven’t done some research before applying.
If you’re thinking that the Taxpayer Relief Provisions may be an option for you, do some research or speak to a licensed accounting practitioner about how to construct the best argument for relief.
Frank Flynn is a former Canada Revenue Agency Collections Enforcement Officer now operating Taxpayer Relief Letters, a niche consultancy specializing in writing taxpayer relief requests. He also provides consulting services to people and companies who are under collection action by C.R.A. Frank Flynn has published plays, essays, and letters internationally and holds a joint major Bachelors Degree in English Literature, and Cultural Studies. He is currently completing a Masters Degree in Creative Writing. His website can be found at www.taxpayerreliefletters.ca