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How and when to use the taxpayer relief program: advice from experts

In some cases, it’s possible to apply for relief from penalties and interest, although the taxes themselves cannot be waived

Side View Of Colleagues Analyzing Graphs On Laptop At Office DeskWhen applying for taxpayer relief, it’s important to include strong documentation as well as specific details and dates where possible (Getty Images/Nattakorn Maneerat/EyeEm)

When a taxpayer is faced with a penalty or interest—if they filed their return late, for example, but believe they had a good excuse for doing so—they can sometimes apply for taxpayer relief.

“The taxpayer relief program doesn’t have to do with waiving taxes, because the Canada Revenue Agency (CRA) does not have to power to do that,” says David Posner, CPA, a partner at Zeifmans LLP. “Instead, it has to do with waiving or reducing interest and penalties.”

The program can also be used to deal with other issues—for example, in cases where a taxpayer wants to file a late tax election or they want to reduce their taxes beyond the normal reassessment period based on amounts not previously claimed.

Here are some pointers for taxpayers and their advisers on using the program.

CITE RELEVANT REASONS

To apply for taxpayer relief, taxpayers or their representatives can fill in and file form RC4288 or apply online through the CRA’s My Account, My Business Account or Represent a Client portals. This form clearly indicates some of the reasons that can be cited for making such a request, such as:

  • Financial hardship or inability to pay
  • A death, accident, serious illness, emotional or mental distress
  • A disaster, such as a flood or fire
  • A disruption in services, such as a postal strike
  • A CRA delay or error, such as undue delays in resolving an audit or objection, or incorrect information provided by the CRA.

As Posner points out, there are many reasons that can be cited for being late; however, the CRA generally asks for supporting documentation. “For example, you might need a doctor’s letter or statements from your bank account showing the hardship you are facing.”

On the form, the taxpayer or their representative must describe all the circumstances and facts supporting the request, including any steps taken to correct or avoid the tax situation your client is facing.

“It’s important to include strong documentation as well as specific details and dates where possible,” says Posner.

If the first review is unsuccessful, you or the taxpayer can apply for a second review, stating why your client disagrees with the previous decision.

CHOOSE YOUR TOOLS

Since the objections and taxpayer relief programs are similar in nature, it’s important to know which to use.

“Say, for example, that a late filing penalty is assessed,” says Bruce Ball, FCPA, vice-president of taxation at CPA Canada. “If you can prove that the return was filed on time, you can object to the assessment of the penalty. If it was filed late but there was a good reason for doing so—weather, illness, etc.—then you can ask for relief. In terms of choosing the right tool, there is no point objecting if the return was truly late because objections only deal with disagreements over application of the law.”

In all cases, the taxpayer’s particular circumstances will dictate what tool—whether it be an objection, taxpayer relief, or some other mechanism—is to be used to achieve the best result.

STAY TAX AWARE

Learn more about when and how to file an objection and when to call in a lawyer during the appeals process.

Plus, keep up to date on important tax issues, such as managing and mitigating tax practice risks, running a high-quality tax practice, and understanding tax rules for PSBs with our tax blog.

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