Canadian taxpayers, on occasion, refrain from filing tax returns due to a fear of possible tax debt. However, under particular circumstances, the Canadian Revenue Agency (CRA) will actually reduce tax debt for certain taxpayers.
AG Tax professionals have highlighted situations during which the CRA may reduce tax debt, and have briefly summarized the CRA Tax Relief Program and the Consumer Proposal Program.
CRA’s Tax Debt Reduction Process Overview
Interest and penalties are incurred when tax filing deadlines are missed; it is incredibly important to file taxes on time.
It is difficult to waive the principal portion of tax debt without a federal legislation as the Canadian Income Tax Act does not grant such powers to CRA. However, if a taxpayer qualifies, interest and penalties may be reduced or even cancelled.
Tax situations that may be reduced by the CRA
There are specific cases which may be considered by the CRA for tax relief from penalties and interest.
- Natural or man-made disasters (such as fire, civil disturbances, strikes, earthquakes, or hurricanes).Unavoidable situations (such as an accident, terminal illness, or emotional or mental stress due to death).
- Financial hardships (due to loss of employment or if the interests are a huge portion of the tax payment making it difficult to clear the tax liability; or if clearing the full tax liability would hinder the basic lifestyle of the taxpayer and his/her family).
- CRA Actions (such as error on the part of the CRA leading a taxpayer to make errors in the return which result in wrong payments; likewise if there is a delay in resolving an appeal, objection, or an audit).
CRA’s Taxpayer Relief Program
The CRA’s Taxpayer Relief Program allows a taxpayer to apply for relief from taxes plus interests and penalties, if any of the above conditions (see: Tax situations that may be reduced by the CRA) are met. If the CRA accepts the taxpayer into the taxpayer relief program, a portion of the interest and penalties may be reduced, or fully eliminated. Additionally, this may provide an extended time period to reduce the new tax amount without any penalties.
Consumer Proposal Program
In the event that a taxpayer has no means to pay off his/her tax liability, the Consumer Proposal may help prevent any further interest on the account, and stop collection actions issued by the CRA.
Other options
Lastly, if there are no alternatives available to clear off the debt obligation, filing for bankruptcy may be the last resort. However, it is vital to consult a bankruptcy trustee in order to review the situation and confirm that tax liability will be discharged if bankruptcy is claimed.
Before applying for tax relief under the CRA’s Tax Relief Program or the Consumer Proposal program, it is strongly recommended that a tax professional is consulted.
Negotiating with the CRA can be tricky, and it is best to work with experts whom are well-versed in the various CRA payment programs and experienced in dealing with the CRA.
AG Tax LLP Can Help
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance
Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- State Sales Tax & E-commerce Taxation
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
