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Late or Unfiled Tax Returns / Back Taxes / Tax Debts

  1. What are the circumstances in which the CRA may waive or reduce penalties and interest charges on a tax debt?
  2. Could I pay my CRA tax bill online?
  3. What is “taxpayer relief” and how can I qualify?
  4. How much interest am I paying on my overdue CRA tax debt?
  5. What are some of the more common CRA collections methods to collect unpaid tax debt?
  6. Will the CRA accept a payment plan for an overdue tax debt?
  7. What can I do if I simply can’t pay my tax bill due to financial hardship?
  8. Is there a penalty for a late tax filing – i.e. filing after the tax deadline?
  9. Where do I send form RC4288, Request for Taxpayer Relief?
  10. Are tax debts treated differently from other debts one may owe to a creditor?
  11. Could I avoid a large tax bill at the end of the tax year by paying in installments over the course of the year?
What are the circumstances in which the CRA may waive or reduce penalties and interest charges on a tax debt?

The CRA may waive or reduce penalties and interest charges on a tax debt at the discretion of the Minister of National Revenue under Taxpayer Relief Provisions. These tax waivers or tax reductions come as a result of an unforeseen situation that affects a taxpayer, which can include a natural disaster, personal hardship, service disruptions or an error by the Canada Revenue Agency. A request made by a taxpayer to waive tax payment or reduce the tax payment amount must happen within ten calendar years after the end of the tax year in question.

Some examples of such circumstances are natural disasters like a flood and man-made disasters, such as a fire, a postal strike that leads to service disruptions, emotional distress caused by death in the family, and serious illness or accidents. Another situation that may lead to waivers or reductions in taxes due is when the CRA is the cause of late payments or extra payments, due to lack of information provided, which lead to payments resulting from incorrect information. Additionally, the Canada Revenue Agency may waive interest or penalties or reduce interest or penalties when a taxpayer faces financial hardship due to loss of employment or loss of income or when the interest represents a significant portion of payments due. The interest may be waived as long as payments are made on time by the taxpayer.

Taxpayers may submit their request to have interest or penalties waived or cancelled in writing with the tax center or tax services office where the tax return was filed or by filling out Form RC4288, Request for Taxpayer Relief, which can be found at www.cra-arc.gc.ca/formspubs/menu-eng.html or requested at toll-free 1-800-959-2221. Any written request must explain the situation and circumstances surrounding the taxpayer’s inability to pay and this claim must be backed up with supporting documents.

An experienced tax lawyer may be able to negotiate a better tax settlement on your behalf. Feel free to call Barrett Tax Law, a Canadian tax law firm representing taxpayers across Canada, for a free consultation to see if you may qualify for tax relief and/or interest relief and/or penalty relief by the CRA: 1-877-8-TAX-TAX or consultations@fightthecra.ca

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Could I pay my CRA tax bill online?

Yes, as of October 2009, the Canada Revenue Agency allows taxpayers to make payments from accounts at select financial institutions using the new My Payment service provided online. It is important to note that no banking information or tax sensitive details are exchanged between the CRA and the bank or financial institution. Currently, only financial institutions that have Interac Online payment service can allow their clients this direct online payment option. The following banks offer this payment option: BMO Bank of Montreal, Scotiabank, TD Canada Trust and RBC Royal Bank.

In order to access My Payment, visit www.cra.gc.ca/mypayment and follow the instructions. Make sure you have your account information from the CRA. Once you select “Pay Now”, choose your financial institution and follow the instructions to make your payment. Once the transaction has been completed, you will have access to a receipt with a confirmation number for your financial records.

Please note that you must be registered for online banking with your bank to access this service.  There is no additional fee imposed by the CRA to use this service.

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What is “taxpayer relief” and how can I qualify?

The Canada Revenue Agency’s Taxpayer Relief Provisions gives the Minister of National Revenue the ability to eliminate or reduce interest and penalty charges to a tax bill as well as to return or decrease the amount owed on ones tax bill (beyond the typical three-year time period one normally has to make such an adjustment). In addition, the Minister has the power to accept late income tax elections as well as to approve a taxpayer’s request to change certain elections taxpayers have chosen to use when preparing their income tax return.

For the cancelation or reduction of interest and/or penalty charges, the Minister of National Revenue will consider such requests if the taxpayer has found him/herself unable to comply with his/her normal tax responsibilities due to A) a specific action taken by the Canada Revenue Agency, such as delays or errors in processing the tax return, B) extraordinary circumstances beyond the taxpayer’s control, like a death or illness in the immediate family or a natural disaster, C) inability to settle the tax debt and/or serious financial burdens, such as unemployment, or the fact that additional interest and penalty charges would lead to the taxpayer being unable to pay for certain basic necessities, and/or D) other situations not specifically outlined above.

It is important to note that the Minister can only consider requests for taxpayer relief in respect of the previous ten calendar years. In other words, the taxpayer has ten years to make a request to the minister to eliminate or reduce interest and/or penalty charges as well as ten years to request a refund or change to the income tax assessment beyond the typical three year period that one has to request such changes, as well as ten years to ask for an acceptance or change in a tax election used by the taxpayer in the preparation of his/her income tax return.

A request for taxpayer relief must be made in writing and sent via mail to the correct CRA Tax Services Centre. Although it is not a requirement to use a specific tax form to make a taxpayer relief request, the Canada Revenue Agency recommends that tax form RC4288, Request for Taxpayer Relief, be used. In order to make a taxpayer relief request without the use of CRA tax form RC4288, the written request must be titled, “Taxpayer Relief” and all relevant documentation should be sent to one of the following tax services centres which applies to the taxpayer:

  • British Columbia and Yukon
    Burnaby-Fraser Tax Services Office
    9737 King George Boulevard
    P.O. Box 9070, Station Main
    Surrey, British Columbia
    V3T 5W6, Canada
  • Alberta, Saskatchewan, Manitoba, and Northwest Territories
    Winnipeg Tax Centre
    2nd Floor
    66 Stapon Road
    Winnipeg, Manitoba
    R3C 3M2, Canada
  • Ontario and Nunavut
    Summerside Tax Centre
    275 Pope Road
    Summerside, Prince Edward Island
    C1N 5Z7, Canada

(*Although the above address may seem incorrect since it is an address in Prince Edward Island for requests specific to Ontario and Nunavut, the above address is posted on the Canada Revenue Agency website, http://www.cra-arc.gc.ca/gncy/cmplntsdspts/sbmtrqst-eng.html )

  • Quebec
    Shawinigan-Sud Tax Centre
    4695, 12th Avenue
    Shawinigan-Sud, Quebec
    G9N 7S6, Canada
  • New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador
    Summerside Tax Centre
    275 Pope Road
    Summerside, Prince Edward Island
    C1N 5Z7, Canada

Non-resident or international taxpayers
(for individuals, corporations, trusts, and part XIII and non-resident withholding accounts only)

International Tax Services Office
P.O. Box 9769, Station T
Ottawa, Ontario, K1G 3Y4
CANADA

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How much interest am I paying on my overdue CRA tax debt?

The Canada Revenue Agency charges compound daily interest on any overdue taxes or balance owing starting May 1st for the preceding tax year. Interest is charged on tax penalties from the day after your tax return is due.

The exact amount of interest charged can change every quarter and the CRA maintains an updated list which can be found at the following Canada Revenue Agency web page: http://www.cra-arc.gc.ca/tx/fq/ntrst_rts/menu-eng.html .

The CRA continues to charge compound daily interest on any owed balance from previous years until repaid even if there are new tax penalties or owed balances with interest accruing from more recent years. Remember that the Canada Revenue Agency has the ability to waive or reduce interest and penalties that you owe. For more information, see “What are the circumstances in which the CRA may waive or reduce penalties and interest charges on a tax debt?” or call Barrett Tax Law for a free legal consultation with an experienced tax lawyer at 1-877-8-TAX-TAX. You may also book your free consultation with a Barrett Tax Law lawyer in real-time by clicking here.

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What are some of the more common CRA collections methods to collect unpaid tax debt?

The Canada Revenue Agency has a variety of methods they use to collect unpaid tax debt from an individual or business. The most common methods include wage garnishment, imposing property liens, freezing and/or seizing bank accounts, intercepting monies payable to you and seizing and selling your assets.

For more information on these tactics, see “What is salary garnishment or wage garnishment?” and “What is a tax lien?” located in this FAQ section.

If you fear that the CRA may start collections actions on you or your company, do not hesitate to call Canadian tax law firm, Barrett Tax Law, for a free consultation with an experienced tax lawyer at 1-877-8-TAX-TAX. You may also reserve a date and time for your free legal consultation by clicking here.

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Will the CRA accept a payment plan for an overdue tax debt?

The Canada Revenue Agency may accept a payment plan for an overdue tax debt under certain circumstances. The taxpayer must prove that he or she is not in a financial position to pay in full the amount owing but could do so over the course of two years or less. In order to prove this, the CRA will need complete financial disclosure from the taxpayer, meaning details about your place of employment, assets, investments and bank accounts.

Please note that negotiation with the CRA over payment plans can be difficult and any information you disclose in the hopes of coming to an agreement can then be used by the CRA to obtain taxes owing if they deny your request. To find out more about how the CRA can go after you for taxes owing, see “What are some of the more common collections methods used by the CRA to collect unpaid tax debt?”

It is best to discuss your options with a qualified tax lawyer and avoid disclosing such sensitive details until after the Canada Revenue Agency accepts a payment plan. Barrett Tax Law is proud to offer hardworking Canadian taxpayers a free legal consultation with an experienced tax lawyer to have your questions and concerns answered. Call toll-free 1-877-8-TAX-TAX Canada-wide or book your consultation in real-time by clicking here.

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What can I do if I simply can’t pay my tax bill due to financial hardship?

The CRA has the power to accept a payment plan that will allow you to pay off your tax debt over a set period of time. However, they will only accept a plan once you have sufficiently tried to borrow money or rearrange your financial affairs in order to pay the tax debt in full.

Although tax lawyers are trained to negotiate with the Canada Revenue Agency on your behalf to obtain the best possible deal, you can set up a payment plan with the CRA on your own by calling 1-866-256-1147, which is the CRA’s Telearrangement service line. You will need to provide your social insurance number, birth date and the amount entered on line 150 of the return for which you have been assessed by the Canada Revenue Agency. The hours of operation for the Telearrangement service line are Monday through Friday from 7:00 a.m. to 8:00 p.m. Eastern time.

You can also speak personally with a CRA agent about payment plans at toll-free 1-888-863-8657. Agents are available Monday through Friday, with the exception of holidays, from 8:00 a.m. to 8:00 p.m. local time.

Please note that the CRA continues charging compound daily interest on any outstanding balance of owed taxes even though you are on a payment plan.  For more information about the interest you pay on owed taxes and how the CRA can waive or reduce that interest, see “How much interest am I paying on my overdue CRA tax debt?” and “What are the circumstances in which the CRA may waive or reduce penalties and interest charges on a tax debt?”

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Is there a penalty for a late tax filing – i.e. filing after the tax deadline?

The Canada Revenue Agency does apply a penalty for filing your tax return after the deadline if you owe taxes. The penalty is equivalent to 5% of the total balance owing in addition to 1% of the total balance owing for each month that the tax return is late up to a limit of 12 months. If within the past three tax years the CRA imposed a penalty for late tax filing and you once again file your tax return after the deadline, the penalty can rise to 10% of the total balance plus 2% of the total balance per full month that the tax return is late up to a maximum of 20 months.

The CRA can waive or reduce penalties for late filing if circumstances beyond the taxpayer’s control lead to filing after the deadline.  In order to request a tax waiver or a tax reduction, you must complete form RC4288, Request for Taxpayer Relief, and send it to the tax centre that corresponds to you. See “Where do I send my RC4288, Request for Taxpayer Relief?” for details.

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Where do I send form RC4288, Request for Taxpayer Relief?

Form RC4288, Request for Taxpayer Relief, must be sent to a Canada Revenue Agency Tax Centre, and the exact tax services office depends on where the taxpayer resides.

For taxpayers serviced by a tax services office in British Columbia, the Yukon, and Regina, the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
9755 King George Boulevard
Surrey, British Columbia
V3T 5E6, Canada
 

For taxpayers serviced by a tax services office in Alberta, Manitoba, the Northwest Territories, London, Saskatoon, Thunder Bay and Windsor, the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
Post Office Box 14001, Station Main
Winnipeg, Manitoba
R3C 3M3, Canada
 

For taxpayers serviced by a tax services office in Toronto Centre, Toronto East, Toronto North, Toronto West, Barrie, and Sudbury (the area of Sudbury/Nickel Belt only), the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
1050 Notre Dame Avenue
Sudbury, Ontario 
P3A 5C2, Canada

 

For taxpayers serviced by a tax services office in Laval, Montréal, Nunavut, Ottawa, Rouyn-Noranda, Sherbrooke, and Sudbury (other than the area of Sudbury/Nickel Belt), the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
Post Office Box 4000, Station Bureau-chef
Shawinigan, Quebec
G9N 7V9, Canada

 

For taxpayers serviced by a tax services office in Chicoutimi, Montérégie-Rive-Sud, Outaouais, Québec, Rimouski, and Trois-Rivières, the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
2251 René-Lévesque Boulevard
Jonquière, Quebec
G7S 5J2, Canada

 

For taxpayers serviced by a tax services office in New Brunswick, Newfoundland and Labrador, Nova Scotia, Kingston, Peterborough, and St. Catharines, the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
Post Office Box 12072, Station A
St. John’s, Newfoundland 
A1B 3Z2, Canada

 

For taxpayers serviced by a tax services office in Prince Edward Island, Belleville, Hamilton, and Kitchener/Waterloo, the mailing address where Form RC4288 must be sent to is as follows:

Canada Revenue Agency Tax Centre
105 – 275 Pope Road
Summerside, Prince Edward Island 
C1N 6E8, Canada

 

For non-resident taxpayers, the mailing address where Form RC4288 must
be sent to is as follows:

International Tax Services
102A – 2204 Walkley Road
Ottawa, Ontario 
K1A 1A8, Canada

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Are tax debts treated differently from other debts one may owe to a creditor?

Tax debts owed to the Canada Revenue Agency are slightly different from other debts owed to a creditor. The CRA has a special set of laws and rules that only apply to tax debt, and they have more options and power when it comes to collecting tax debts; for example, wage garnishing, bank account freezes and tax liens. The key difference is that the Canada Revenue Agency does not need a court order to garnish wages but a regular creditor does. For more on wage garnishing and tax liens by the CRA, see “What is salary garnishment or wage garnishment?” and “What is a tax lien?” Apart from the CRA’s collection power and special rules, tax debt is otherwise seen as equal to other debts one owes to a creditor. This means that consumer proposals and personal bankruptcy erases debt owed to the Canada Revenue Agency similarly to personal credit card debts, loans and other unsecured debts.

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Could I avoid a large tax bill at the end of the tax year by paying in installments over the course of the year?

Yes, the Canada Revenue Agency does allow for income taxes to be paid throughout the year in installments when it would otherwise be due as a lump sum at the end of the tax year on April 30th. These installments are not paid in advance of income you receive but rather while you are receive the taxable income. These installments usually are set up when not enough tax is being withheld at the source of the income; for example, rental properties, investments, self-employment or having more than one job.

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