Wildfires And Tax Audits: Relief Available But No Hall Pass

Did you know that Canada suffers about 8,000 wildfires every year that ravage 2.5 million hectares of land¹? This has been a particularly difficult year in BC and the northern prairies. CRA wants taxpayers affected by natural disasters to know that Taxpayer Relief Provisions are available to waive penalties and interest on taxes owing if tax filing is late as a result. But a tax return must still be filed.

Further, CRA expects that precautions in storing hard copy and electronic files are taken, especially in high-risk areas. Should records be lost, destroyed or damaged, it must be reported to CRA’s Tax Services Office. In those cases, taxpayers must recreate the files to the best of their ability in a reasonable time frame and obtain as much back-up information as possible from employers, financial institutions and suppliers. 

If money should be owed to CRA, and if, as a result of late filing, penalties and interest accrue, CRA will consider waiving those costs. but a formal application must be made. To access the Taxpayer Relief Provisions, file form RC4288. Reasons for waiving penalties and interest can include:

 

• Natural disasters like forest fires, floods and tornados
• Man-made disasters
• Civil disturbances
• Death, accident, illness, emotional or mental distress
• CRA errors or delays
• Financial hardship resulting in an inability to pay

It is usually a good plan to have a Tax Services Specialist assist with the full explanation that the CRA requires to explain your reasons for relief, which is granted on a case-by-case basis. That’s especially important if records have been destroyed or a large amount is due.

A history of events leading to the inability to file or pay, and what steps were taken to avoid the situation and/or correct it, must be outlined. It also pays to point out model tax filing behavior in the past; that is, if taxes were consistently filed and paid in years leading up to the hardship, it’s easier for CRA to approve the application for relief.

Filing as soon as possible after a hardship subsides can also be lucrative. It will restore access to refundable tax credits like the Child Tax Benefit and the GST Credit, create RRSP filing room for the future and allow taxpayers to make use of carry-forward provisions.

¹ Public Safety Canada and CRA website