Do you have tax arrears? If so, you will pay tax penalties and/or interest charges to the CRA. The only way to avoid penalties is to get into a habit of filing your income taxes on time. Like many people, you have most likely accumulated tax arrears because of unavoidable circumstances that were beyond your control. There is a protocol for having your penalties or interest changes cancelled or waived.
How to have your penalties or interest charges waived
It is never a smooth process when a taxpayer with tax arrears seeks justice by themselves. The CRA tax collection agents need to face a tax professional that understands their practices. Through your tax professionals, file all your late tax returns prior to sending an application for relief from interest charges or penalties. It is important to make sure that your tax returns are completely honest and accurate.
Why penalties or interests may be waived
When reviewing an application from a client with tax arrears, the Canada Revenue Agency reflects on different parameters.
- Did you go through a catastrophe? – These are known as extraordinary circumstances and they include disasters (floods and fire) that could lead to destruction of tax records. Others include civil disruptions like riots or strike, family calamities like death or severe illness or certain aspects of divorce cases.
- Financial hardship – This one is explained as a hardship brought about by CRA penalties or interests. It could be so severe that you are not able to give your family even the basic needs. Also, penalties or interests could be waived for the reason that they are so hefty that you are not able to meet your tax arrears. If you want to go through this safely, then disclose your finances totally with accurate documents. But note that the CRA expects you to dispose your assets or even borrow a loan to meet your tax arrears obligations.
- CRA actions – If you have proof that your penalties or interests resulted from the delays that were caused by the CRA, then you can apply for a waiver or cancellation of penalties or interest charges and win. These actions, for instance, could be the fact the CRA did not notify the taxpayer about their tax arrears on time. There are also cases where a taxpayer files late taxes because of being given incorrect information or experiencing irrational delays during a dispute resolution.
If you decide to follow up on your own, then you should submit the CRA Form RC4288. Read the information before completing the form to get guidance. Also, be sure to provide all relevant documents to increase your odds of success. It will not be easy to actually convince CRA that you got into tax arrears that read to penalties and/or interests because of a genuine reason. But it can be done particularly with a professional by your side.