If you work in the Accounting, Tax Preparation, or Tax Law industries, you’ve probably heard of the Taxpayer Relief provisions of the Income Tax Act (220.(3.1) of the ITA). And there’s probably a reasonable percentage of citizens who have an idea that they can ask for relief from penalty and interest on tax debts. But there’s a lot more to the taxpayer relief legislation than simply requesting relief from penalty and/or arrears interest.

One of the tools available to tax filers is the use of elections. Broadly speaking, elections are permissible alternate reporting methods. Of course as with any other tax provision, there are rules and deadlines associated with using elections. So what happens when a taxpayer finds they’re beyond an election submission deadline, or need to amend or revoke an election? Part III of the Taxpayer Relief guidelines has that covered. Under this section of the legislation, a taxpayer can ask Canada Revenue Agency to allow submission, revocation or amendment of certain elections. This can be an incredibly helpful tool. But there’s a catch! (Isn’t there always a catch?) In order to use this provision, the taxpayer must pay an up front penalty with their application. The taxpayer must pay the lesser of $8000.00, or $100.00 for each complete month from the election’s original due date, to the date the application is submitted. If the net result of using, revoking, or amending an election is greater than the penalty amount… it might be worth it.

Every year thousands of taxpayers come to the unpleasant discovery that Canada Revenue Agency don’t have to accept unclaimed deductions, adjustments, or un-filed tax returns that are beyond the normal 3 year limitation period. Once again, the taxpayer relief legislation can be a life-saver in this regard. Part IV of the Taxpayer Relief guidelines enables taxpayers to seek refunds or reductions to amounts payable that are beyond the normal 3 year period. This effectively means that when a taxpayer discovers old unclaimed deductions, has an unclaimed refund, or needs to reverse an arbitrarily assessed amount, they can apply under Part IV of the taxpayer relief legislation to have the Agency reassess statute barred years. Of course, It’s not as simple as just asking. In order to succeed with such an application, compelling extraordinary circumstances must be presented.

Here’s another tidbit… yes taxpayers can apply for relief from ARREARS interest, but they can also ask the CRA to waive CURRENTLY accruing interest. In other words, they can ask that the Agency stop the interest clock from ticking on a going forward basis. Very helpful for folks digging themselves out from under a big tax debt.

For professional advice on all things Taxpayer Relief, please feel free to reach out.