Relief for the distressed
There can be a softer side to the CRA
If you've been suffering from physical or mental health issues that caused you to be late filing your return or making a tax payment, you may be able to apply for relief from the Canada Revenue Agency under the "fairness" provision.
The fairness legislation gives the CRA the discretion to cancel or waive all or a portion of any interest or penalties payable. However, it doesn't exempt the actual taxes owing.
To use the fairness doctrine, the penalties and interest charged for late filing or late payment of taxes must have resulted from circumstances beyond your control. These can include: natural disasters, a serious illness or accident, or serious emotional or mental distress such as a death in the family.
To apply for relief you need to send a letter to the CRA. The letter should contain your name, address and social insurance number, the tax year(s) involved and the facts and reasons why any interest or penalties charged were caused by factors beyond your control. Be sure to include any relevant receipts, documents or correspondence, including medical evidence. If your request for fairness relief is turned down, you can request a second review by the director of the tax centre or district office. Failing satisfactory resolution, you can apply to the courts for a judicial review.
While the court does not have the discretion to directly reverse the CRA's decision, it will determine whether the CRA has "exercised its discretion in a reasonable and fair manner."
A case decided late last year involved a successful Toronto businessman who experienced a series of tragic personal events over a seven-year period which affected his ability to pay his taxes. In 1999, one of his daughters was diagnosed with a serious illness and died three years later. In 2000, his other daughter became seriously ill and was forced to undergo various difficult treatments, including one that was only available in the United States and not covered by the Ontario Health Insurance Plan, leading to a dispute over payment. The stress of these tragedies led to the breakdown of his marriage.
In April, 2005, he was involved in a catastrophic car accident which left him seriously injured and unable to work.
All this stress caused him to develop "serious mental and emotional problems, including depression." He was ultimately hospitalized in a psychiatric facility and died in July, 2006.
In May, 2006, just prior to his death, he filed an application for fairness to forgive interest and penalties relating to his tax filings for 2000 through 2004. In October, 2006, the CRA denied his fairness request stating, "we are not convinced that the delay in meeting his tax obligations was entirely due to the circumstances presented."
The estate appealed the matter in court, citing medical and psychiatric evidence provided to the CRA that suggested that the stress the taxpayer was under "took a toll on his overall mental health, resulting in depression, anxiety, sleep disturbance and multiple psychosomatic problems."
The judge found the decision to deny the fairness application "unreasonable" and referred it back to the CRA for a new review.