Skip to main content
taxpayer dealing with CRA

The Canada Revenue Agency (the “CRA”) has the power to waive penalties and interest.  Subsection 220(3.1) of the Income Tax Act and section 281.1 of the Excise Tax Act grant the Minister of National Revenue, through the CRA, discretion to cancel or waive all or any portion of any penalty or interest that would otherwise be payable by a taxpayer or a partnership for any tax year (or fiscal period, for a partnership) that ended within 10 years before the calendar year in which the request is made. For interest, the 10-year limit refers to years during which the interest accrued, not the year for which the tax was originally payable (see Bozzer v. R., 2011 FCA 186).



Canadian taxpayers are entitled to apply to the CRA for taxpayer relief of penalties and interest.  All that is required is for a taxpayer who has been assessed to complete and submit an RC4288 form “Request for Taxpayer Relief – Cancel or Waive Penalties and Interest“.  This form can be used for income tax, goods and services tax (the “GST”) and harmonized sales tax (the “HST”).

The form is simple – however, it is advisable to use a professional to deal with it as details you provide are very important.  Section 2 is very important and any taxpayer seeking a significant amount of relief should take care in writing the reasons for the request.  It is always better to provide a separate document setting up the facts, including all circumstances and adversities and other reasons why the taxpayer thinks the relief should be granted.  Limiting the written communication to the form most often is insufficient and may lead to refusal as relief is not guaranteed.

It is within the CRA’s discretion to grant it or refuse it.  The CRA agents follow their internal guides, and you need to provide them with as much evidence as possible that may put your situation within the criteria that will allow grant of the relief.  It may also be helpful to include relevant documents to support the description of the facts and reasons.

The CRA upon receipt of your application will provide an acknowledgement letter confirming its receipt, however, the CRA will not give you dates or even a time limit as to when they will make a decision on wither to grant penalty and interest relief.



The administrative guidelines the CRA will follow in deciding whether to grant relief in respect of income taxes and GST/HST are found in Information Circular IC07-1R1: Taxpayer Relief Provisions and GST/HST Memorandum 16-3, GST/HST – Cancellation or Waiver of Penalties and/or Interest (together, the “Guidelines”).  The CRA may grant relief from penalty or interest when the following types of situations prevent a taxpayer from meeting their tax obligations:

  • extraordinary circumstances:
    • natural or human-made disasters, such as a flood or fire;
    • civil disturbances or disruptions in services, such as a postal strike;
    • serious illness or accident; and
    • serious emotional or mental distress, such as death in the immediate family;
  • actions of the CRA:
    • processing delays that result in taxpayers not being informed, within a reasonable time, that an amount was owing;
    • errors in CRA material which led a taxpayer to file a return or make a payment based on incorrect information;
    • incorrect information provided to a taxpayer by the CRA;
    • errors in processing;
    • delays in providing information, resulting in taxpayers not being able to meet their tax obligations in a timely manner; and
    • undue delays in resolving an objection or an appeal, or in completing an audit;
  • inability to pay or financial hardship:
    • a collection has been suspended because of an inability to pay caused by the loss of employment and the taxpayer is experiencing financial hardship;
    • a taxpayer is unable to conclude a payment arrangement because the interest charges represent a significant portion of the payments; or
    • payment of the accumulated interest would cause a prolonged inability to provide basic necessities (financial hardship) such as food, medical help, transportation, or shelter; consideration may be given to cancelling all or part of the total accumulated interest; and

The Waiver Guidelines are not legally binding. Thus, the CRA may not deny a request simply because the taxpayer’s circumstances do not squarely fall into one of the relief grounds. In practice, however, it is difficult to find instances where the CRA has granted a relief application not based on one of the relief grounds. If your situation does not squarely fall within the first 3 categories, providing a document describing your circumstances in a right and compelling way becomes even more important.



As part of its COVID-19 Economic Response Plan, the Government has taken a number of steps to alleviate hardships faced by taxpayers.  These measures include filing deadline extensions and payment deferrals to help individuals and businesses coping with mandatory business closures and self-isolation.

For returns filed and payments made by the extended deadlines established by the Government, which vary according to the tax in question and category of taxpayer (the “COVID-19 relief periods”), the CRA announced that it will not charge penalties and interest.  The CRA, however, will not automatically waive penalties and interest in relation to tax balances that are outside of the COVID-19 relief periods. This means that interest will continue to accrue on tax balances that pre-existed the COVID-19 outbreak, and those that remain unpaid after the expiration of the COVID-19 relief periods.  The CRA has indicated that it will consider requests from taxpayers to cancel or waive penalties and interest on tax balances not covered by the COVID-19 relief periods on a case-by-case basis, and that such requests will be given priority.

Taxpayers may apply for additional waiver of penalties and interest due to COVID-19:

  • Extraordinary circumstances: Historically, the CRA considered the 2013 flooding in Fort McMurray and the 2018 wildfires in B.C. and Ontario to be “natural or human-made disasters”. Health issues such as the 2003 SARS epidemic and 2000 E. coli water contamination in Walkerton, Ontario were also considered to be extraordinary circumstances warranting relief of penalties and interest for those affected. The automatic granting of relief for penalties and interest otherwise arising within the COVID-19 relief periods suggests that the COVID-19 pandemic should constitute an “extraordinary circumstance”. Unclear, however, is the extent to which the CRA will view the pandemic as preventing taxpayers from complying with the Income Tax Act or the Excise Tax Act for periods outside the COVID-19 relief periods.


  • CRA delay: As part of its response to COVID-19, the CRA announced that any objections not related to Canadians’ entitlement to benefits will be temporarily held in abeyance, and audit activities have been suspended. It is reasonable to assume that interest accruing in a period during which an audit or appeal was unilaterally suspended by the CRA due to COVID-19 should be waived.


  • Inability to pay and financial hardship: It is possible that many taxpayers may find themselves in the situations set out in a point form above as a result of the pandemic. For requests made based on inability to pay or financial hardship, taxpayers are typically required to provide full financial disclosure including a statement of income, expenses, assets, and liabilities, along with supporting documents (such as bank and credit card statements for the past three months, loan and mortgage statements, and financial statements).  The CRA will not usually consider cancelling a penalty based on inability to pay or financial hardship unless extraordinary circumstances prevented compliance.  However, the Guidelines acknowledge that there could be exceptional situations for which penalties are cancelled; 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.


The CRA has acknowledged that the COVID-19 crisis is an “extraordinary circumstance” by pre-emptively waiving penalties and interest for tax balances falling within the COVID-19 relief periods.  Although the CRA has stated that it will only consider waiving penalties and interest on a case-by-case basis for tax balances outside of the COVID-19 relief periods, it is reasonable to expect that the impacts of the COVID-19 crisis will be recognized as a basis for relief where such impacts persist.  Taxpayers facing compliance difficulties and hardship due to the COVID-19 crisis should consider requesting relief for periods outside the COVID-19 relief periods.



If the taxpayer gets a decision that is not favourable – it happens often – then there is the ability to request an impartial review of the CRA officer’s decision by the CRA (not the same CRA officer who rejected the request).

If the review procedure ends in a rejection of the requested relief, it is possible to seek a review by the Federal Court of Appeal by way of a judicial review.  However, judicial reviews often are an expensive legal procedure and can cost tens of thousands of dollars or even more, depending on the complexity of the issues.

Thus, it is better to maximize your chances of approval and do your application well on the CRA level.  The Request for Taxpayer Relief Program can be very long and very frustrating.  That does not mean it is not worth the effort and one should not try.  It is also advisable to use a tax professional to assist with it.