As usual, the Canada tax government has a deadline in place which is nothing new. In this case it is the deadline for taxpayer relief. Now this one isn’t so bad, because all it means is that if you are wanting to apply for this government program you can only carry back your request in regards to 2004. If you are anticipating help for tax years before this, then you are out of luck.
A lot of people really don’t understand what the taxpayer relief is, and although they may have heard about it they assume that it only applies to a current tax situation in the current tax year. This is not true, as tax payer relief can relate back to the last ten years of your tax filings. So, this is why December 31,2014 is the deadline for tax payer relief applications relating to the tax year 2004.
Now you may be wondering what would be the benefit of going back in your tax years for tax payer relief if you have managed to get yourself back on track. Here is an example of why one might want to do that.
Judy owned a small business that at the end of her first year she had made a taxable profit of $40,000. This meant that she would have to pay tax on this profit. However, due to a bad car accident she had to close the business, and now no longer had any working form of income and was unable to pay these taxes. Knowing that she could not send a cheque for the taxes owed she merely didn’t file the return. The tax bill began to accumulate in penalties and interest. Finally when Judy was able to get back on her feet again which was a year later, she struggled to pay the tax bill that had now become quite extensive because of the add on of the penalties and interest.
In this example, Judy could apply to the CRA for taxpayer relief of the penalties and interest. It doesn’t mean that just by filing that she is going to be granted relief. Each application is ruled upon by the CRA according to its merit.
So if Judy was eventually able to pay off her tax obligation why would she now go back and ask for tax payer relief?
The reason being is because quite often when someone gets into a tax situation like this it has a “snowball” effect. Having to raise the additional money owed to pay the penalties and interest may have created a heavy financial burden on the taxpayer, and this can have a lasting effect going forward for the tax payer.
The CRA has recognized this and has created a criteria to be followed for those who find themselves in a situation similar to this.
