Applying for relief from tax penalties and interest

When events beyond your control prevent you from meeting your tax obligations, applying to cancel or waive your penalties and interest may be a possibility.

There are certain criteria that must be met in order to apply for this relief, and The Canada Revenue Agency (CRA) will consider all requests. However, if you do meet the criteria, that alone does not guarantee that relief will be granted.

Who can apply?

To apply to have penalties and interest cancelled or waived, you need to explain why you are asking for this relief. The following are common situations:

Extraordinary Circumstances

Extraordinary circumstances may include, but are not limited to, the following examples:

• natural or human-made disasters, such as a flood or fire
• civil disturbances or disruptions in services, such as a postal strike
• serious illness or accident
• serious emotional or mental distress, such as death in the immediate family
• your authorized representative or third party experienced an extraordinary circumstance, such as described above, that prevented you from meeting your tax obligations

Financial hardship

If it is confirmed that you are not able to pay what you owe, interest in whole or in part may be waived or cancelled to allow you to pay your debt. Examples include:

• you cannot pay due to financial hardship
• interest charges make up a major amount of what is due and you are unable to make a reasonable payment arrangement
• for individuals, paying the interest would make it difficult to provide basic necessities, such as food, medical care, transportation, or shelter for a prolonged period

Actions of the CRA

The CRA may cancel or waive penalties and interest when they result from CRA actions, such as:

• processing delays that result in you not being informed within a reasonable time that an amount was owing
• errors in CRA materials which led you to file a return or make a payment based on incorrect information
• incorrect information provided to you by the CRA
• errors in processing
• delays in providing information, resulting in you not being able to meet your tax obligations on time
• undue delays in resolving an objection or an appeal, or in completing an audit

Other

The CRA may also grant relief if your circumstances do not fall within the situations described above. If you submit your request for relief, the CRA will review it and determine if relief can be granted due to your circumstances.

Which situations would not qualify for relief?

The following situations would not be considered for relief:

• penalties and interest that fall outside the 10-year period
• assessed tax (relief only applies to penalties and interest)
• when the CRA has no legislative authority
• administrative charges such as bank chargeback fees

What if a third party caused the delay?

You are generally considered to be responsible for errors or delays made by your representative or third party. However, there may be exceptional situations where relief may be granted in these situations.

How many years back can I go?

The CRA will consider a request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make a request (see Limitation period on exercising discretion and the deadline for requesting relief). For example, a request made in 2023 must relate to a penalty for a tax year or fiscal period ending in 2013 or later.

How do I apply?

The basics of applying are:

1. Explain why you are applying
2. Gather the necessary documentation
3. Submit your request

Complete details on the application process, required documents, and links to the application portal can be found on the CRA website HERE.

Questions?

If you have any questions about this article, applying for penalty or interest relief, or any of our other related services, please contact one of our Tax experts, or complete the contact form below.