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Question

Hi Phil

I found your website and I’m hoping you can help shed some light on my situation. Last year my accountant filed a few late tax returns for me and I was unpleasantly shocked about how much CRA charged me in penalties (about $8,000). I know it’s my fault for not filing my tax returns on time, but I really wish my accountant warned me about possible penalties.

Is there any way I can get these penalties waived or reduced?

Looking forward to your response.

Regards

XXXXXX

Answer

Hi XXXXX

Sorry to hear about the tax penalties. Unfortunately, you may not have very many options. One option would have been to file under the voluntary disclosure program offered by CRA, however it’s too late to use the program and you may not have even qualified for the program to begin with. That will be a question for your current accountant to answer.

Generally speaking, after CRA applies a penalty you have only 3 options:

The first option is to adjust your tax returns (via form T1adj) for any errors and changes that need to be made. If you can reduce the amount of taxes owing, CRA will reduce penalties accordingly. That being said, you can only make actual adjustments that you can substantiate, such as additional expenses and credits that were not previously claimed.

The second option would be to file a Notice of Objection within 90 days of the tax return assessment. You would only file an objection to the original assessment if you disagreed with how CRA has assessed the returns, not necessarily because of a required adjustment. For example, perhaps CRA disallowed some of your credits and/or expenses and you feel as though you have a reasonable basis for claiming these items. In that case, a objection would be appropriate.

The third option would be to appeal to CRA for penalty reduction under the Taxpayer Relief program. Under the program, if you can show the non-filing of the tax returns and related penalties were due to:

  • Extraordinary circumstances
  • actions of the CRA
  • financial hardship
  • other circumstances

You may be able to get some penalty relief.

If you want to discuss your situation and related options in more detail please give me a call at 250-381-2400 and I’ll be happy to walk you through your options.

Regards

Phil

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Philip Hogan

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

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