GUIDELINES FOR THE CANCELLATION AND WAIVER OF INTEREST AND PENALTIES
The law
1. The "normal reassessment period" is the period that ends three years after the day of mailing of a notice of an original assessment.
2. Penalties and interest may be waived or cancelled in whole or in part where they result in circumstances beyond a taxpayer’s or employer’s control. For example, one of the following extraordinary circumstances may have prevented a taxpayer, a taxpayer’s agent, the executor of an estate, or an employer from making a payment when due, or otherwise complying with the Income Tax Act:
(a) natural or human-made disasters such as, flood or fire;
(b) civil disturbances or disruptions in services such as, a postal strike;
(c) a serious illness or accident; or
(d) serious emotional or mental distress such as, death in the immediate family.
3. Cancelling or waiving interest or penalties may also be appropriate if the interest or penalty arose primarily because of actions of the Department, such as:
(a) processing delays which result in the taxpayer not being informed, within a reasonable time, that an amount was owing;
(b) material available to the public contained errors which led taxpayers to file returns or make payments based on incorrect information;
(c) a taxpayer or employer receives incorrect advice such as in the case where the Department wrongly advises a taxpayer that no instalment payments will be required for the current year;
(d) errors in processing; or
(e) delays in providing information such as the case where the taxpayer could not make the appropriate instalment or arrears payments because the necessary information was not available.
4. It may be appropriate, in circumstances where there is an inability to pay amounts owing, to consider waiving or cancelling interest in all or in part to facilitate collection. For example:
(a) When collection has been suspended due to an inability to pay.
(b) When a taxpayer is unable to conclude a reasonable payment arrangement because the interest charges absorb a significant portion of the payments. In such a case, consideration may be given to waiving interest in all or in part for the period from when payments commence until the amounts owing are paid provided the agreed payments are made on time.
5. In addition too, the following factors will be considered whether or not the Department will cancel or waive interest or penalties:
(a) whether or not the taxpayer or the employer has a history of compliance with tax obligations;
(b) Whether or not the taxpayer or employer has knowingly allowed a balance to exist upon which arrears interest has accrued;
(c) whether or not the taxpayer or employer has exercised a reasonable amount of care and has not been negligent or careless in conducting their affairs under the self assessment system;
(d) whether or not the taxpayer or employer has acted quickly to remedy any delay or omission.
Click here to See the decision of the Honourable Mr. Justice von Finckenstein in a most recent tax case as how the courts want the Canada Revenue Agency and the GST Agency to administer the waiving of penalties