August 16, 2022
By: Marvin Dillon, Paralegal
A death in the family is always a traumatic event. Adding to the emotional trauma is the question of what to do if a parent, or even both parents for that matter, have passed away leaving behind unsettled tax debt? What if this tax debt has progressively grown over an extended period, for example longer than ten years? Can this tax burden be passed on to their estate? Short answer – yes, it can.
Generally, if the tax burden arose because of financial hardship or extraordinary circumstances which prevented the taxpayer(s) from meeting its tax obligation, the estate may consider applying to the Canada Revenue Agency (the “CRA”) to seek relief from interest and penalties under the auspices of a taxpayer relief application (TPR) if, and only if, the tax debt arose within the prior ten years of the date of the application for relief. However, what if the tax debt originated beyond the last ten years? Is the estate left chained to an ever-growing tax debt?
In these circumstances, the estate may consider submitting a remission request to the Minister of National Revenue (the “Minister”) for reprieve from not only interest and penalties, but in addition, the remittance of the amounts of taxes owing. Essentially, a remission request can provide relief from interest and penalties and may even provide for the write-off of taxes owing, in full or in part.
For instance, relief from interest and penalties which originated beyond the last ten years could, potentially, be considered under a remission request, but certainly not under the auspices of a TPR application given the statutory limit for TPR applications, the last ten years from the date of the application for relief.
It is very important to note however, that the option of submitting a remission request should only be considered provided the applicable grounds for remission existed at the time the tax debt originated.
Who can apply for a Remission request?
A remission request may be submitted by a person or by their legal representative. A person, in the context of a remission request, may be an individual, a corporation, a partnership, a small business, a sole proprietor, a trust, a registered charity, an organization, or given the context of this article, an estate.
What are grounds for Remission?
Such grounds may include dire financial hardship, financial setback usually attributed by an extenuating factor such as one’s medical condition. Other grounds include CRA mistakes or unintended results of applicable legislation.
When seeking a request for remission, a person must be able to substantiate that the financial hardship, extraordinary circumstance, or any other applicable grounds for relief, predates the tax debt or directly caused the tax debt in the first place.
Can a Remission request Be Denied?
A remission request is never guaranteed and may be denied. Always keep in mind that an application for remission must be able to substantiate that the grounds for relief predated or directly caused the tax debt in the first place.
Furthermore, a remission request will not be reviewed if the application for remission will result in a change to existing legislation, if the request for remission includes an amount which includes provincial tax, if an alternate channel for reprieve is available, or if insufficient information is provided to substantiate the grounds on which the remission request is being made.
In the event that taxpayers have been appointed executor to an estate in which there may be amounts owing to the CRA on account of interest or penalty, or tax amounts owing, relief may be sought under a remission request application if grounds for relief do exist.