Canada Revenue Agency (CRA) may either ‘waive’ or ‘cancel’ a penalty and/or interest. ‘Waive’ refers to a penalty or interest amount that is not yet assessed or charged for which relief is granted, in whole or in part, by the CRA. ‘Cancel’ refers to a penalty or interest amount that is assessed or charged for which relief is granted, in whole or in part, by the (CRA). You may never be charged penalty/interest as it’s too small or maybe you’ve been really good in the past and this one slip-up is forgiven.
What circumstances warrant relief?
You may have you run into a situation that is completely beyond your control. There could be extraordinary circumstances that prevented, or may prevent, you from making a payment when due, filing your taxes on time, or filing a government remittance on time.
These extraordinary circumstances could be:
There could also be circumstances where penalty/interest are waived because CRA made an error, and yes they do make mistakes, they’re human too [don’t laugh]. This could be because of processing delays and you’re not informed in a reasonable time that you have an amount owing. You followed a CRA guide, or website material, that led you to file a tax return or make a payment based on incorrect information. You called CRA and the representative gave you incorrect information (note that CRA representatives now give you an ID number, so write that down). Errors in processing also happen and information may have been entered incorrectly by CRA; I had a client have income go missing because CRA misfiled a T4A.
If you’re going through a financial hardship and can show your inability to pay amounts owing, CRA may waive or cancel any interest in whole or part so you can pay the amount owing. Financial hardship doesn’t apply to waiving or canceling a penalty, unless an extraordinary circumstance prevented compliance, or an exceptional situation existed. For example, when a business is experiencing extreme financial difficulty and enforcement of such penalties would jeopardize the continuity of its operations, the jobs of the employees, and the welfare of the community as a whole, consideration may be given to providing relief of the penalties.
CRA may consider waiving or cancelling interest in the following situations:
If you’ve found yourself in a pickle with CRA, don’t panic and don’t procrastinate in filing your tax returns, government remittances, etc. It is much better to file and owe than not file and owe. You may have a balance owing, however, if you file on time you won’t face a penalty just interest on the balance owing. Currently (Sep 2013), the prescribed rate of interest on balances owing to CRA is 5%.
Getting Your Tax Records Ready for Your Accountant
What Records Do You have to Keep and Who Has to Keep them?
How should I organize my receipts?
What does an authorized representative do?
Tidbits – What do I do with a Bad Debt?
Tidbits – What information do I need from a new hire?
Don’t File Late, Watch That Date!
If I give a gift to an employee, is that taxable?