Oftentimes our clients find themselves facing tax trouble as a result of circumstances beyond their control. In order to promote fairness and equity in our tax system, the Income Tax Act gives the Canada Revenue Agency (CRA) the discretion to resolve tax issues that arise due to the personal misfortune or circumstances of taxpayers. Administered as the Taxpayer Relief Program, CRA has the power to:
- Cancel/waive penalties and interest;
- Accept late-filed, amended or revoked income tax elections; and
- Provide income tax refunds beyond the 3-year period normally allowed (for individuals and testamentary trusts only).
Cancel or waive penalties or interest
The CRA may grant relief from interest and penalties when the following types of situations prevent a taxpayer from meeting their tax obligations:
- extraordinary circumstances (i.e. natural or man-made disasters, civil disturbances, serious illness or accident, or serious emotional/mental distress)
- actions of the CRA (i.e. processing delays, incorrect information provided to a taxpayer, or errors in processing);
- inability to pay or financial hardship; and
- other circumstances (unique situations not covered by the other categories)
Late, amended, or revoked elections
The Income Tax Act contains many election provisions that give taxpayers the opportunity to select an alternative tax treatment when filing their taxes. However, most election provisions do not permit the taxpayer to file an election beyond its original deadline or to modify or cancel elections that have been filed.
The Taxpayer Relief Program gives CRA the ability to extend the statutory time for filing certain elections or to permit certain elections to be amended or revoked.
Refund or reduce the amount payable beyond the normal three-year period
For individuals (other than a trust) and testamentary trusts, the Income Tax Act sets a three-year limitation period from the end of the tax year to file an income tax return to claim a tax refund. It also sets a three-year limitation period from the date of the original Notice of Assessment to request an adjustment to an assessment issued for a previous tax year.
The Taxpayer Relief Program gives CRA the ability to relieve the limitations period and, in certain circumstances, to accept late requests to give the individual or testamentary trust a refund or reduction in tax.
It is important to note that there is a 10-year time limit on the taxpayer relief provisions. This means that an application for relief filed in 2015 can only deal with issues related to a taxpayer’s 2005 and later years.
How to make a relief request: If you do find yourself in one of the situations above and feel that you are within the taxpayer relief provisions or would like more information, please feel free to contact Tax Solutions Canada for further guidance and we will be happy to assist you: 1-888-868-1400.