There is an important, front line role tax professionals can take to help devastated flood victims with tax relief, effective immediately. CRA issued a statement on November 30 encouraging residents of BC affected by the flooding to request taxpayer relief if it affects their ability to pay their taxes on time. However, any taxpayer who is experiencing hardship may want to discuss a relief request, especially if errors or omissions that have lead to missed refunds or benefits. Here’s an overview on two important relief options available:
Pandemic-driven Interest Relief: tax filers who must meet all of the following criteria will be forgiven interest costs if cannot pay their taxes:
All Other Cases: CRA is empowered to issue tax refunds and accept late filed or revoked returns beyond the normal three-year reassessment period for individuals and testamentary trusts - to a maximum 10-year limitation period, currently spanning the 2011 to 2020 tax filing years - should the following circumstances occur:
Extraordinary circumstances. This can include factors beyond the taxpayer’s control including:
Actions of the CRA. This can include:
CRA may cancel those excessive interest costs (in whole or in part) when their own collections activities must be suspended because of an inability to pay, caused by the loss of employment and those interest charges represent a significant portion of the CRA liability and are causing a financial hardship. Also, cancellation of interest is possible where the accumulated interest costs cause an inability to provide basic necessities such as food, medical help, transportation, or shelter.
Unfortunately, CRA will not usually cancel a penalty based on inability to or financial hardship. But they may if there is an extraordinary circumstance that prevented compliance with tax filing and payment.
CRA provides an example where a business may be experiencing extreme financial difficulty and its enforcement of tax penalties would jeopardize the continuity of business operations, the jobs of the employees, and the welfare of the community as a whole. This will be an important example to point to should CEWS or other pandemic-support audits push businesses to the brink of bankruptcy.
However, professional advisors will want to warn clients that for CRA to grant interest or penalty relief they will require full financial disclosure. This will include statements to support the reporting of income, expenses, assets, and liabilities.
CRA has provided a form to do so: The Statement of Income and Expenses and Assets and Liabilities for Individuals . For businesses, please see Determining a business’ financial situation .
Taxpayer relief requests can be submitted through My Account or Represent a Client. Look for the following:using the "Request relief of penalties and interest" service; or filling out Form RC4288, Request for Taxpayer Relief - Cancel or Waive Penalties or Interest and selecting the "Submit documents" service. Businesses or their representatives can apply online through My Business Account, or Represent a Client
The CRA also issued the following reminders to those affected by the flooding:
Additional educational resources: Earn the credentials to help taxpayers in need, especially as we approach another complex tax filing season. Enrol now to become a DFA-Personal Tax Services Specialist™.