Taxpayer Relief Applications: How to Request Penalty and Interest Relief – A Complete Guide by a Montreal CPA Firm Near You

Introduction

CRA penalties and interest can accumulate quickly—whether from late filing, late payment, incorrect GST/HST reporting, payroll remittance errors, or past financial hardships. Many taxpayers don’t realize they have a legal option to request relief: the Taxpayer Relief Program. When used properly, this program can eliminate years of interest, waive penalties, and provide financial breathing room. However, the application process is complex and evidence-driven, and poorly prepared requests are often denied. This guide explains exactly how Taxpayer Relief works and how to maximize your chances of approval.

Legal and Regulatory Framework

Taxpayer Relief is governed by section 220(3.1) of the Income Tax Act, section 281.1 of the Excise Tax Act (GST/HST), and CRA’s administrative policies (IC07-1R1). CRA may cancel or waive penalties and interest if the taxpayer demonstrates: extraordinary circumstances, financial hardship, CRA error or delay, or inability to pay due to factors beyond their control. Relief can apply to personal tax, corporate tax, GST/HST, payroll deductions, and certain information return penalties. Relief is limited to a 10-year period under statute.

Key Court Decisions

In Bozzer v. Canada, the Federal Court of Appeal confirmed that CRA can grant relief for interest that accrued within the 10-year limitation period—even if the underlying tax debt is older. In Kruger v. Canada, CRA was ordered to reconsider a relief denial because the taxpayer provided compelling evidence of hardship. In Nickerson v. Canada, relief was upheld where CRA delays contributed to taxpayer penalties. These cases show relief is possible when applications are well-documented.

When You Should Apply for Taxpayer Relief

Taxpayer Relief is appropriate when penalties or interest arose due to: serious illness or medical events, mental health crises, natural disasters, divorce or domestic abuse, death in the family, financial hardship preventing timely payment, major business interruptions, CRA processing delays, CRA providing incorrect information, or catastrophic events (fire, flood, theft of records). Relief is not granted for routine financial difficulties, poor bookkeeping, or ignoring deadlines without explanation.

Types of Relief CRA May Grant

CRA may:

• Cancel or waive penalties

• Cancel or waive interest

• Reduce instalment interest

• Reduce interest on GST/HST or payroll accounts

• Eliminate penalties for T4/T5 information return delays (if circumstances justify)
  Taxpayer Relief cannot reduce the tax itself—only penalties and interest.

How to Apply for Taxpayer Relief

Applications can be submitted by:

• CRA Form RC4288 – Request for Taxpayer Relief

• Online through CRA My Account or My Business Account
  Your request must include: taxpayer identification, tax years affected, specific penalties or interest to be waived, detailed explanation of circumstances, and all supporting documents. Relief requests must be factual, specific, and supported by evidence—generic explanations are usually denied.

Essential Supporting Documentation

Strong applications include: medical records, hospital discharge summaries, death certificates, insurance claims, financial statements showing hardship, CRA correspondence showing delay, legal documents, police reports (if applicable), eviction or job-loss notices, mental health records (if voluntarily provided), and proof of attempts to comply. CRA requires concrete evidence.

What CRA Considers When Reviewing Your Application

CRA evaluates: the circumstances that caused the penalty/interest, your previous compliance history, steps you took to resolve issues promptly, whether you acted as soon as possible, reasons for inability to pay, quality of record-keeping, and whether CRA contributed to the delay. Strong credibility and documentation increase approval likelihood.

How Long It Takes

Taxpayer Relief reviews can take 3 to 18 months, depending on volume and complexity. You may be contacted for additional information. A formal written decision will be issued.

If CRA Denies Your Request

You may file a second-level review within CRA if new information arises. If still denied, you may apply for Judicial Review at the Federal Court—but only on grounds of unreasonableness, not simply disagreement. Judicial Review is technical and usually requires legal counsel.

Common Mistakes That Lead to Denials

Taxpayers often: submit vague explanations, provide no documentation, blame CRA without proof, exaggerate hardship, wait too long to apply, request relief for tax (not penalties/interest), or fail to demonstrate extraordinary circumstances. These mistakes result in fast dismissals.

Mackisen Strategy

At Mackisen CPA Montreal, we prepare strong Taxpayer Relief submissions backed by evidence, legal arguments, and detailed timelines. We analyze penalty assessments, draft persuasive narratives, gather supporting documents, challenge incorrect CRA assumptions, and escalate cases when necessary. Our structured relief applications significantly increase approval rates.

Real Client Experience

A Montreal business owner had $22,000 in interest waived after we provided medical evidence of a critical illness. A taxpayer affected by CRA delays received full cancellation of penalties. A self-employed worker avoided payroll penalties after proving financial hardship. A new immigrant family had GST/HST interest removed due to documented misinformation from CRA.

Common Questions

Can CRA remove all interest? Yes—if justified. Can I apply even if I still owe taxes? Yes. Is relief guaranteed? No—applications must meet strict criteria. How far back can CRA cancel penalties? Up to 10 years. Can businesses apply? Yes—corporations and sole proprietors are eligible.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal builds strong, evidence-based Taxpayer Relief applications that protect clients from overwhelming penalties and interest. We help you regain control of your finances and rebuild compliance with confidence.