Personal Finance

CRA Penalty - Has Anyone Had This Waived?

  • Last Updated:
  • Aug 23rd, 2021 2:51 pm
[OP]
Sr. Member
Jul 22, 2015
701 posts
256 upvotes
Ontario

CRA Penalty - Has Anyone Had This Waived?

I have a self-employed friend who was late to file 2019 taxes. She had paid 2/3 in 2019 and was owing another 1/3 which she plans to pay this year. She now has a late filing penalty of approx $2000 and about $700 in accrued interest. With covid last year, she didn't have time to file due to working + homeschooling kids.

Ha anyone been able to successfully have their penalty and/or interest waived? I mentioned to her that they might do a payment plan, but she's looking to see if they ever waive it completely. TIA
17 replies
Deal Addict
Apr 16, 2015
1043 posts
1324 upvotes
CRA will do waivers in extraordinary circumstances, but she would need a much better reason than homeschooling the kids to even be considered for a waiver (like deaths, natural disasters, etc.). Here's the link to the relevant CRA page: https://www.canada.ca/en/revenue-agency ... erest.html

Also, if she's self-employed and earning over $3000/year, she's probably required to pay taxes in advance quarterly instalments instead of paying it all in April. So, unless she has already paid half of her 2021 taxes, she better get on top of that before things get alot worse. https://www.canada.ca/en/revenue-agency ... ments.html
[OP]
Sr. Member
Jul 22, 2015
701 posts
256 upvotes
Ontario
catsoncoffee wrote: CRA will do waivers in extraordinary circumstances, but she would need a much better reason than homeschooling the kids to even be considered for a waiver (like deaths, natural disasters, etc.). Here's the link to the relevant CRA page: https://www.canada.ca/en/revenue-agency ... erest.html

Also, if she's self-employed and earning over $3000/year, she's probably required to pay taxes in advance quarterly instalments instead of paying it all in April. So, unless she has already paid half of her 2021 taxes, she better get on top of that before things get alot worse. https://www.canada.ca/en/revenue-agency ... ments.html
Thank you for those links.

She did pay the quarterly installments as required, but after filing, she still owed an additional 1/3 of the overall taxes.

What do you mean by "unless she has already paid half of her 2021 taxes, she better get on top of that before things get alot worse"? --- that her total taxes owing will be unmanageable or will there be additional penalties and interest?
Deal Addict
Jun 8, 2004
2112 posts
1218 upvotes
Oakville
They already gave everyone an extension, due to Covid, until Sep 1, 2020, to file their 2019 taxes without any penalties and interest. Normally, the filing deadline was Jun 15, 2020 for self-employed, so that was a ~75 day extension given to them. Even if they didn't have the money to pay, they should have still filed by the Sep 1, 2020 deadline to have avoided the $2k late filing penalty.

https://www.canada.ca/en/revenue-agency ... risis.html
New tax filing and payment deadlines

The deadline for most individuals to file their 2019 taxes has been extended to June 1, 2020. The deadline to pay amounts owed has also been extended to September 1, 2020. Penalties and interest will not be charged if payments are made by the extended deadlines of September 1, 2020. This includes the late-filing penalty as long as the return is filed by September 1, 2020.

If you, your spouse, or your common-law partner are self-employed, you still have until June 15, 2020, to file your taxes. However, your payment deadline has also been extended to September 1, 2020.

For those who have to pay by instalments, the June 15, 2020, payment due date has also been extended to September 1st. Instalment penalties and interest will not be charged for this payment if it is made by the extended deadline of September 1, 2020.
Deal Addict
Apr 16, 2015
1043 posts
1324 upvotes
Acheewawa wrote: What do you mean by "unless she has already paid half of her 2021 taxes, she better get on top of that before things get alot worse"? --- that her total taxes owing will be unmanageable or will there be additional penalties and interest?
They will charge interest on late or insufficient instalments (and penalties if that interest is over $1000).
Deal Addict
Jun 8, 2004
2112 posts
1218 upvotes
Oakville
To add to what I wrote for 2019, the 2020 tax filing deadline was not extended and remained Jun 15, 2021, for self-employed and that date has also already past, so hopefully, they already filed their 2020 taxes as well to avoid another year of late filing penalties.

I am not sure how receptive they will be to waiving the late filing penalties if they late filed both 2019 and 2020 tax years.
Deal Addict
May 23, 2006
1580 posts
592 upvotes
Vancouver
It's extremly unlikely the CRA would waive the penalty unless you can demonstrate hardship (e.g. someone's death).
Deal Fanatic
Oct 7, 2007
9277 posts
5105 upvotes
Fantastical wrote: It's extremly unlikely the CRA would waive the penalty unless you can demonstrate hardship (e.g. someone's death).
This has been my experience also. I have learned some important deadlines the hard way BUT I am totally okay with this as long as the rules are applied to all taxpayers equally.
Deal Addict
User avatar
Dec 24, 2007
1698 posts
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BC
choclover wrote: This has been my experience also. I have learned some important deadlines the hard way BUT I am totally okay with this as long as the rules are applied to all taxpayers equally.
The CRA policy is clearly stated...the key guiding principle to having penalties and interest waived or cancelled is that you can show that circumstances beyond your control prevented you or someone else on your behalf from filing or paying on time.
Deal Fanatic
Oct 1, 2004
6651 posts
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GTA
Acheewawa wrote: I have a self-employed friend who was late to file 2019 taxes. She had paid 2/3 in 2019 and was owing another 1/3 which she plans to pay this year. She now has a late filing penalty of approx $2000 and about $700 in accrued interest. With covid last year, she didn't have time to file due to working + homeschooling kids.

Ha anyone been able to successfully have their penalty and/or interest waived? I mentioned to her that they might do a payment plan, but she's looking to see if they ever waive it completely. TIA
That’s like the worse reason anyone can possibility think of… doe she really expect anyone to believe she couldn’t take a hour to total up and file a return with all the lockdowns?
Deal Addict
Jun 8, 2004
2112 posts
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Oakville
greg123 wrote: That’s like the worse reason anyone can possibility think of… doe she really expect anyone to believe she couldn’t take a hour to total up and file a return with all the lockdowns?
Usually gathering and preparing data needed for self-employed income takes longer than an hour (which is how long a person with just t-slips would need) but the point is correct that it shouldn't take 400+ extra days
Deal Fanatic
Oct 7, 2007
9277 posts
5105 upvotes
Here's a tip that may lessen the burden...I understand that if you PREPAY and overpay your taxes for the year (e.g. make huge lump sum payment), you will earn interest that can be used to offset the interest owing. You can call CRA to see if this applies to your personal circumstance but I have seen this on company statements of account from the CRA before.
Deal Addict
Aug 26, 2004
3386 posts
636 upvotes
Toronto
greg123 wrote: That’s like the worse reason anyone can possibility think of… doe she really expect anyone to believe she couldn’t take a hour to total up and file a return with all the lockdowns?
One hour ? Depends how complex your taxes are.
[OP]
Sr. Member
Jul 22, 2015
701 posts
256 upvotes
Ontario
greg123 wrote: That’s like the worse reason anyone can possibility think of… doe she really expect anyone to believe she couldn’t take a hour to total up and file a return with all the lockdowns?
Definitely not an hour for self employment. Entering business receipts, plus separating HST from all receipts, locating receipts, etc she has said that it takes many, many hours to do. And the lockdowns caused her to have less free time, not more. She was working FT hours + caring for 3 kids and helping with them with virtual school (so essentially, she was also a FT teacher, LOL).
Deal Guru
Dec 5, 2006
13453 posts
8832 upvotes
Markham
Just call CRA and the worst case scenario is just pay for it.

This lockdown definitely generates a lot stress and additional works, for example taking care of kids. But many people experienced this and paid tax on time and why government extended deadline.

Those are legitimate reasons that your friend didn't pay tax timely, but shouldn't become excuses.

I would be more concerned this "small" thing snowballed
Deal Fanatic
Oct 7, 2007
9277 posts
5105 upvotes
Acheewawa wrote: Definitely not an hour for self employment. Entering business receipts, plus separating HST from all receipts, locating receipts, etc she has said that it takes many, many hours to do. And the lockdowns caused her to have less free time, not more. She was working FT hours + caring for 3 kids and helping with them with virtual school (so essentially, she was also a FT teacher, LOL).
I doubt this will garner any sympathy or penalty forgiveness from CRA. From a fairness perspective, we have "all" struggled during the pandemic and it will be unlikely that they will make an exception for you.

If I was in charge, I would do a lot of things differently, all pro-business for our country, but I think on the basis of why an exception should be made for your circumstances, I see CRAas being highly unlikely to grant an exception based on what you have described.
Member
Jan 18, 2017
361 posts
276 upvotes
I hate to be that guy, but at some point, as a business owner, you have to focus and prioritize your time.

$700 in accrued interest (plus whatever the late-filing fee is. (Edit: Just saw: $2,000. Holy crap) would more than cover whatever the accounting fees would cost to pay a CPA to handle her file. And, she'd free up the "many, many hours" spent doing bookwork that she clearly doesn't enjoy, and could instead focus on her full-time job and children.

Instead, she is out all of that time, has to pay out more money, and has the headaches involved in dealing with CRA. To be frank, $2700 in penalties vs. probably $500 in accounting fees for a self-employed T2125 is just being ignorant.

To answer your question, no, CRA won't waive the penalties/interest in this case. "This stuff is hard and I didn't have a lot of free time" isn't generally a valid excuse.
Acheewawa wrote: Definitely not an hour for self employment. Entering business receipts, plus separating HST from all receipts, locating receipts, etc she has said that it takes many, many hours to do. And the lockdowns caused her to have less free time, not more. She was working FT hours + caring for 3 kids and helping with them with virtual school (so essentially, she was also a FT teacher, LOL).
______
Canadian & US tax guy (CPA)
Deal Fanatic
Oct 1, 2004
6651 posts
993 upvotes
GTA
Acheewawa wrote: Definitely not an hour for self employment. Entering business receipts, plus separating HST from all receipts, locating receipts, etc she has said that it takes many, many hours to do. And the lockdowns caused her to have less free time, not more. She was working FT hours + caring for 3 kids and helping with them with virtual school (so essentially, she was also a FT teacher, LOL).
Well that’s what she get for shoving everything in a shoe box till year end… receipts should really be entered as they come in, separating HST is literally a checkbox.

Just imagine if all the teachers doing report cards by memory at end of the year!

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