31 May 2017
There is a common misconception, when it comes to the Canada Revenue Agency (CRA), that you can settle a debt. The CRA will never make a deal to reduce or eliminate your debt, no matter how it occurred.
Why? This stance is taken in an attempt to ensure that everyone is treated equally.
By attending to cases on a case-by-case basis, granting forgiveness by subjective standards, some would end up with better deals than others. To avoid this, the objective “NO” actually means no in all cases. If you plan on applying for CRA debt forgiveness, good luck – but this doesn’t actually exist.
This myth developed thanks in part to the various programs that offer some recourse – those CRA programs such as Taxpayer Relief and Voluntary Disclosures – which grant some relief from penalties and interest. However, none of these programs offer relief from the debt itself.
This is a program set up to help those who, through extreme or extraordinary circumstances, were unable to pay a debt. Penalty and interest may be reduced or eliminated thanks to such situations as extreme financial hardship, personal hardship (death in the family), or a natural disaster. The application is complex, and needs to be done correctly, the first time.
This program is for those who have made incorrect statements or claims in past income tax filings and want to make amends BEFORE the CRA is made aware of them. By voluntarily disclosing the incorrect information, you are essentially asking for forgiveness for past mistakes, and often the CRA will grant relief from penalties and interest as a result of your desire to become tax compliant. Again, this is not CRA debt forgiveness, but rather interest and penalty forgiveness. Any debts will still stand firm.
Filing an Objection
If you believe that, in the course of its assessment, the CRA has made a mistake, resulting in a tax debt or penalties and interest, you can submit an objection within 90 days of the assessment. When this is done, interest and penalties will stop accruing as the objection is reviewed. If accepted, the penalties and interest will be waived, and the assessment corrected – which may mean the debt is removed, but this is because of a CRA mistake – not forgiveness. However, if rejected, those penalties and interest will be applied retroactively.
If you are dealing with a tax debt and are incorrectly operating under the assumption that appealing to CRA sympathies may lead to debt forgiveness, we urge you to reconsider. Hoping a tax debt will just disappear, or be forgiven because of your unique situation, will just leave you disappointed.
Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.