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Sample Penalty Relief Letter


April 15, 2016

Canada Revenue Agency
Summerside Tax Centre
275 Pope Road
Summerside, PE
C1N 6A2

   SIN: 999-99-9999
   Tax Form: T1
   Tax Year: 2014

To Whom it May Concern:

Please be advised that XYZ represents the above referenced taxpayer, [taxpayer’s name] (hereinafter referred to as “Taxpayer”). We are writing to request that her penalty for filing a return after the due date and paying late together with interest are abated for her 2012 tax year. A discussion of the underlying facts, supportive law and analysis, and the basis for our conclusion appears below.


The Taxpayer is well aware of his filing and payment obligations with the CRA and acknowledges that he has not been in full compliance. However, it is our contention that his particular set of facts and circumstances do not warrant penalties.

The Taxpayer went through some of the worst times of his life, from the years 2006 through 2014. In 2006 the Taxpayer filed for bankruptcy after his first business crumbled.

After his bankruptcy in 2006, the Taxpayer used his previously acquired skills and started his own bread distribution company.

The weight and stress of the Taxpayer’s bankruptcy played a toll on his marriage and this too began to fail. In 2006 the Taxpayer’s mother-in-law was diagnosed with cancer and she moved into the Taxpayer’s house so that he and his wife could care for her. The Taxpayer took her to doctor’s appointments and provided all her special nutritional needs, but she lost her battle with cancer.

The Taxpayer’s second business began showing signs of deterioration and then in 2013 he lost his second business.

In 2013, the Taxpayer’s mother whom he was very close to passed away from a sudden heart attack. Although death of one’s parent is expected in life, the Taxpayer’s already fragile state was broken even more by this passing.

The Taxpayer separated from his wife in 2014, as at that point, after years of deterition, the quality of the taxpayer’s marriage had deteriorated to the point where the Taxpayer felt the marriage was irreconcilable.

The Taxpayer is trying to put his life back together. In 2012 he took a job that he continues to this day working in a factory manufacturing parts for the automobile industry. He has three children that he jointly raises with his ex-wife that he lovingly provides for.

The Taxpayer has caught up on his filings and is working to correct his past wrongs.


The purpose of penalties is a regulatory one to encourage voluntary compliance with the tax system, not to punish taxpayers. The Taxpayer had no intention of disobeying the taxing statutes, but rather circumstances beyond his control caused his failure to fully comply.

Information Circular 07-1 dated May 31, 2007 paragraph 8 states that the purpose of the penalty relief provisions is to help taxpayers who “through no fault of their own … because of misfortune or circumstances beyond their control, could not comply with a statutory requirement for income tax purposes.”

Paragraph 23 in Information Circular 07-1 dated May 31, 2007 provides three situations where the Minister may exercise his discretion and waive and/or cancel penalties in the following three situations.

  1. extraordinary circumstances
  2. actions of the CRA
  3. inability to pay or financial hardship

In paragraph 24 of the Information Circular 07-01 it further explains what extraordinary circumstances mean. In particular, paragraph (d) provides for relief in situations of serious emotional or mental distress, such as death in the immediate family.


The Taxpayer has gone through serious emotional or mental distress. First, he has had not one, but three immediate deaths in the family. He lost his mother-in-law, his mother, and his father.

The Taxpayer was also seriously traumatized, as his marriage fell apart.

The Taxpayer also experienced emotional or mental distress by losing his businesses and going bankrupt.

The Taxpayer is working hard to re-establish himself and to care for his family after his hard decade.

A major tax preparation company was retained prior to the due date for filing her 2012 tax return with the IRS. The Taxpayer was without fault as she did not expect that the representative at ABC Company would fall sick and be hospitalized and that the major tax preparation company would not have provided her with a replacement tax professional. The Taxpayer reasonably expected that if anything happened to her representative, she would be contacted by the major accounting firm to ensure that her taxing obligations were fulfilled.

The Taxpayer has also demonstrated that she acted with ordinary business care and prudence as her history of compliance attests to her diligence in ensuring that she complies with the taxing statutes.

The Taxpayer could not reasonably have foreseen that the representative she hired would fall ill and be hospitalized and that the major tax preparation company would not contact her. Further the Taxpayer's own poor mental state due to her marriage ending and her poor physical condition due to her need for cancer treatment demonstrates that under the circumstances, the Taxpayer acted with reasonable care.

In addition, immediately upon the Taxpayer’s discovery of her non-compliance she sprang into action and began taking the necessary steps to rectify the late filing by retaining a new accounting firm to prepare and file her 2012 tax return. The Taxpayer made every reasonable effort to diligently rectify the problem as soon as she discovered that it existed.


The Taxpayer clearly had no intention of disobeying the taxing statutes. The error occurred because the Taxpayer was not in his normal emotional state. It is our contention that requiring the Taxpayer to pay penalties and interest would not support voluntary compliance by taxpayers, as there was clearly no willful intent to disobey the taxing statutes.

We respectfully request that the Minister waive all penalties and the interest associated with those penalties from 2004 through 2010. Thank you.