October 23, 2023
All Tax Articles

This is a very topical issue, and its exact workings are mysterious to many. And many people are not even aware of this option.  

CRA, under provisions of the Income Tax Act that are usually referred to as “Taxpayer Relief”, has the discretion to waive any or all amount of penalties and interest. However, this comes with conditions.  

Note that outstanding taxes cannot be waived. CRA has discretion to eliminate penalties and interest, but not tax.

A taxpayer or their authorized representative can make a request to cancel penalties using CRA My Account online, or by filling out Form RC4288 “ Request for Taxpayer Relief – Cancel or Waive Penalties and Interest, “ and sending it either online or by mail to the CRA. The key is to demonstrate extraordinary circumstances that were beyond the control of the taxpayer.  

These circumstances include the following:

1. CRA error or delay which resulted in confusion or delay in complying with one’s tax obligations.  

2. Natural or human-made disasters – for example, a fire that destroyed records, delaying the ability to file tax returns on time.

3. Death, accident or serious illness of the taxpayer, or, for a company, of a key shareholder or employee.  

4. Civil disturbance  

5. Financial hardship  

6. Any other valid reason  

With all of these, you need to be able to show the connection between the event and the inability to file or pay on time. Simply being sick is not enough; for example, you would need to show that you were sick and unable to act during the time you were required to act. And if you were only sick for a short time, then the CRA might waive interest for only that short time.

Laziness or forgetfulness is not a valid excuse. While this relief measure is for extraordinary circumstances, it is sometimes worth attempting this form even if the reason may not pass the litmus test of extraordinary circumstances, because it is CRA’s discretion.  

Important note: CRA can give a relief for up to 10 years of interest and penalties from the year of the request. For example, if the request is made in 2023, only interest accrued during 2014 and later years can be cancelled.

This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Douglas K. DeBeck

Hello, my name is Douglas K. DeBeck, I am a partner at Lee & Sharpe.

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