Taxpayer Relief May Be Your Solution to Tax Debts

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

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

2 Responses to Taxpayer Relief May Be Your Solution to Tax Debts

  1. Hi Frank, my sister and brother-in-law moved in with my elder mother to help take care of her. My brother-in-law was a bank manager and handled all of my mother’s financial affairs. My mother passed away in 2004, my brother-in-law took over the duties of administering my mother’s estate, although my sister and I are formally the executors. My sister’s son became ill with brain cancer in 2008 and passed away in 20010. Also in 2009 my brother-in-law was diagnosed with colon cancer and passed away in 2011. After my brother-in-laws death and upon trying to finalize my mother’s estate and attempting to obtain a clearance certificate from CRA, we learned that my mother’s 2001, 2002 and 2004 income tax returns had not been filed. The estate paid approx. $7,000 for taxes due plus another $7,000 in penalties etc. On our second attempt to obtain a clearance certificate from CRA we were advised that my mother’s 2000 and 2003 returns had also not been filed. My mother had always believed that ‘things were being taken care of’. I have read the tax relief provisions and understand that third party fault in itself is not a basis of seeking tax relief. I wonder, however, given the extra-ordinary circumstances, and elderly woman (82) relying on her son-in-law who was a bank manager and well advised in financial affairs, subsequent family terminal illnesses delaying these matters coming to light, what are our chances of getting some or all of the penalties waived.

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