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CRA Gross Negligence Penalties: What You Need to Know

Under the Income Tax Act, the CRA may charge the greater of either $100 or 50% of the amount of understated tax as a Gross Negligence penalty. However, you can avoid it getting a CRA Gross Negligence penalty. Farber Tax can help you get relief from CRA penalties.

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Details on the Gross Negligence Penalties CRA May Charge


The Canada Revenue Agency (CRA) has very strong powers that it can use to enforce compliance and punish those who do not follow tax law. Among these powers is the ability to charge penalties. Subsection 163(2) of the Income Tax Act outlines the gross negligence penalties CRA can charge in certain situations.

The Act states that any “person who, knowingly, or under circumstances amounting to gross negligence, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer” can be charged a penalty.

How much are the gross negligence penalties CRA may charge? The Act states that the penalty will be is the greater of either $100 or 50% of the amount of understated tax. This can obviously be a large amount, depending on how much tax is owed.

When does this potential penalty apply? For this penalty to be considered, the CRA must believe that an individual or corporation must have intentionally committed an error or omission or have done so in circumstances that were so blatant that the only way the issue could have been missed is if the party chose to ignore it. This means that it wasn’t just an error, but it was one that should have been noticed if you were using reasonable care.

However, unlike with many other tax situations, the CRA must prove that the penalty is viable. This means the agency must have evidence to show that you acted with neglect. This proof is usually only offered after a taxpayer files an objection.


Objecting to the Gross Negligence Penalties CRA Charges


If you are charged a gross negligence penalty, you can file a formal objection. Once you receive a Notice of Assessment or Notice of Reassessment from the CRA, you can file a Notice of Objection. This indicates that you do not agree with the agency’s assessment or reassessment. You are then able to provide evidence to show that you did not act in a negligent manner and the CRA must then provide evidence to show how you did.

Filing a Notice of Objection is serious. It’s important that you prepare a strong case, backed by evidence, and that you correctly file the objection before the deadline. You only have 90 days from the date on the Notice of Assessment or Reassessment to object and, while extending this deadline is possible, extensions are only provided in some circumstances.

The team at Farber Tax Solutions fully understands the importance of filing a strong Notice of Objection backed by evidence. We know how damaging the gross negligence penalties CRA charges can be and what it takes to successfully dispute them.

In most situations, the CRA has the advantage when dealing with taxpayers because the agency is fully versed in the details of the Income Tax Act and the ins and outs of various CRA policies. However, working with Farber Tax Solutions evens the playing field. Our team is made up of legal and ex-CRA professionals who have the skills and knowledge necessary to negotiate and communicate with the CRA and resolve tax problems. Let us help you file your objection, prepare your case, and present your side of the story to the CRA. We’ll give you the best chance of success at resolving your issue and fighting the gross negligence penalties CRA charges. For more information, please contact us today.

Farber Tax Solutions Helps You at Every Step of the Way including:

  • 1| Organizing: We analyze all documents and communication, to fight the CRA on your behalf
  • 2| Audits: We assist you with audits and ensure proper conduct by tax authorities
  • 3| Appeals: We can prepare a Notice of Objection, clarifying your standing with the CRA
  • 4| Litigation: We represent you at all levels of court