September 07, 2023
One of the most frequently asked questions by our clients is if the CRA would accept less than what is owed in arrears? The simple answer is no. Outside a formal insolvency (i.e. Consumer Proposal or Bankruptcy), the CRA does not have legal authority to lower the principal amount of your debt. In terms of collections, the division operates under a narrow set of policies and procedures aimed at collecting debts with the only flexibility being in payment arrangements that are dictated by your ability to pay. Any attempt to negotiate a lower amount will not be given consideration.
The CRA can however reduce interest and penalties through the Taxpayer Relief Program, a separate division from collections, which grants relief to those taxpayers who qualify. Generally, to be considered for the program you must be eligible under guidelines that state relief will be grant to taxpayers who experienced one or more of the circumstances below:
- Extraordinary circumstances: events beyond a taxpayer’s control that prevented the individual from making payment when due or filing a return on time. This would include, but is not limited to, the following examples: Natural or human made disasters i.e., flood or fire, disruption in services i.e., postal strike, serious illness or accident, serious emotional or mental distress.
- Actions of the CRA: relief may be granted if interest or penalties resulted from actions of CRA, such as: processing delays, errors in material available to the public, incorrect information provided to taxpayer, error in processing, delays in providing info, undue delays in resolving an objection, appeal, or audit.
- Inability to pay or financial hardship: Unless an extraordinary circumstance prevents compliance, cancelling penalties and interest on inability to pay would generally not be considered. There may be a situation in which interest and penalties would prevent a business from operating by negatively affecting cashflows and causing major layoffs that impact the community. When such conditions are present, relief from penalties and interest may be considered.
If you believe any of the above circumstances apply, taxpayer relief might be an option for reducing your tax debts. The process can be started by filing out form RC4288 or contacting tax experts, like Farber Tax Solutions, that specialize in CRA tax disputes.
At Farber Tax Solutions, we work with taxpayers to build a strong case based on the circumstances and supporting documentation provided by our clients, as well as any pertinent legal arguments, to increase the chances of a successful outcome. If you feel this option is suitable for you, give us a call and we would be happy to answer any questions about the program.