How to Ask CRA for Interest and Penalty Relief for an Estate

Estates often fall behind with the CRA for reasons outside the executor's control. Getting authority to act, locating assets and sorting out a dispute can all take months, while interest and penalties keep adding up.

The CRA has a process, called taxpayer relief, that lets it cancel or waive some of those charges. This article explains what it covers, what it does not, and how to prepare a request. It is general information and the outcome depends on the facts.

What taxpayer relief can and cannot do

The CRA can cancel or waive penalties and interest. It cannot cancel the tax itself. So the estate still has to pay the underlying tax, and relief only addresses the extra charges.

For a late final return, those charges are a penalty of 5% of the balance owing plus 1% for each full month late, to a maximum of 12 months, and compound daily interest from the day after the due date. A late T3 may also attract an alternative penalty of $25 per day, with a minimum of $100 and a maximum of $2,500.

The grounds the CRA recognizes

The CRA looks at three broad groups of circumstances.

Meeting one of these does not guarantee relief. Each request is considered on its own facts.

What if the delay was caused by probate?

Delay in getting a court appointment or in dealing with the estate is a common reason for late filing, but whether it supports relief depends on the facts: what caused the delay, whether it was outside your control, and what you did once you were able to act. A lawyer or accountant can help you judge how strong your case is.

It helps to remember that the deadlines run from the date of death, not from the date you were appointed. For example, a final return for a death from January 1 to October 31 is due April 30 of the following year. If a business is involved, the filing date may be June 15, but any balance owing is still due on the regular payment date, generally April 30.

• Explain when the death occurred and when you could first act for the estate.
• Describe the specific obstacles, such as missing records or illness.
• Show what steps you took, and when, once the obstacle was removed.
• Say whether the estate can pay, particularly if you are relying on hardship.

The time limit and how to apply

Relief is limited to penalties for tax years or reporting periods that ended within the last 10 calendar years before the year of the request, and to interest accumulated within that window. Older charges generally cannot be reviewed, so do not wait if you are close to the edge.

You can apply on Form RC4288 or online through My Account or Represent a Client, and the CRA aims to decide within 180 calendar days. Interest and penalties may continue to be charged while you wait, so paying the tax owing in the meantime may reduce further interest.

What to do next

• List each return, the due date and the date it was filed or will be filed.
• Identify the penalties and interest you want reviewed.
• Write a dated timeline of events: death, appointment, discovery of records, filing.
• Collect supporting documents, such as medical letters, correspondence and proof of the estate's finances.
• Submit Form RC4288 or apply online, and keep a copy of everything.
• Keep paying and filing what is due while the request is pending.

Also remember that before you distribute estate property, a clearance certificate is required, or you may be personally liable for unpaid amounts up to the value of what you distributed. If the estate has a large balance or a dispute, get advice from a lawyer or accountant.

Frequently asked questions