The Taxpayer Relief provision is a program that CRA offers to people who want to apply to have all or some of the penalties and interest associated to a tax debt removed. Generally speaking you may qualify for Taxpayer Relief if:
- You have endured extreme financial hardship
- There has been a death or serious medical problem in your immediate family unit
- There has been a disaster such as a fire or flood
- CRA has erred in some way
- There is some other compelling extraordinary circumstance
It is not as simple as just saying that you qualify – you must be able to prove it which makes some grounds for relief easier to be approved on than others.
We have seen one common occurrence where many taxpayers have been successful qualifying for Taxpayer Relief which deals with errors on the part of CRA.
As you know, CRA is a massive bureaucracy and can take months or even years to process tax returns and other applications. We have all heard how CRA loses files, changes the person working on the file, the extension becomes someone else, etc. and so one ends up sitting on hold trying to find someone to speak to.
Where the taxpayer disagrees with the tax assessment or the way penalties and/or interest have been applied the correct course of action to formally record your disagreement is to file a Notice of Objection. When a Notice of Objection is filed it can take CRA a really long time to process it. Sometimes this happens because of disorganization, sometimes this happens because of backlogs and sometimes this happens because you may have an Objection that is similar to another person’s Objection that is before the courts. CRA will sometimes wait for the outcome of court decisions on similar Objections before making a decision on yours.
In the case of assessments that relate to an individual’s involvement in a charity scheme we have seen Objections sit on hold for up to seven years. So what happens if many years later the Objection is rejected? Then they will assess you for interest retroactively. This can cause your tax debt to double and even triple in size.
This is an excellent example of a scenario where you could be successful when applying to CRA for Taxpayer Relief on the grounds that CRA has erred. Now with that said, if approved for Taxpayer Relief, they will only grant it for 10 years retroactively from the date that you applied, so it is vital that if you are filing an application with CRA and anticipate that it could take a long time to be approved that you file for Taxpayer Relief immediately. While your Taxpayer Relief application will not be processed until a decision has been made on your Objection, in our example, the date will be on record which will protect you from the time limitations as it relates to Taxpayer Relief.
Now, just because you apply for Taxpayer Relief does not mean CRA has to approve you. Taxpayer Relief applications are approved at the discretion of the CRA which is why it is important that any application (Objection, VDP, Taxpayer Relief) or even the filing of a tax return is professionally documented, supported and followed-up. We recommend sending any pivotal documentation to CRA by registered mail. You will have the best chance to prove your grounds for relief if you have good documentation and evidence.
For more information about applying for Taxpayer Relief please visit www.taxsolutionscanada.com or call 1-888-868-1400.