Bookkeeper Missed Two Filings. CRA Relief Cut the Bill in Half

The situation

Eun-ji worked the way a lot of people in Scarborough work now: not for one employer, but for whoever needed her that season. Spring and summer meant long days as a farm worker on contracts east of the city, paid in a mix of direct deposits and cash. Fall and winter meant landscaping and snow-clearing crews, invoiced through her own small sole proprietorship. None of it came with an employer withholding tax at source. All of it needed to be reported and reconciled at tax time, on her own.

She had never done that herself. Two years earlier, a friend, Meera, had referred her to Anita, a bookkeeper who worked out of her home, charged a flat seasonal fee, and promised to "handle everything with the CRA." Eun-ji handed over a shoebox of receipts and bank statements each spring and assumed the filings were done, because that was what she was paying for. For a year, they were.

The trouble was the second year. Anita's own circumstances changed — a family illness, by what Eun-ji was later told — and the returns for that year and the one after simply never went in. No missed-appointment email, no unfinished-return warning. Eun-ji kept dropping off her records each spring and kept assuming the silence meant everything was fine.

What the review found

The first sign of trouble was a CRA notice addressed to Eun-ji directly, not the bookkeeper: two years of personal income tax returns were outstanding, and because she was self-employed, so were the related goods and services tax/harmonized sales tax (GST/HST) filings tied to her landscaping invoices. The CRA had estimated her income for the missing years using a method it uses when no return is on file, called an arbitrary assessment, and the estimate ran well above what she had actually earned in the slower landscaping seasons.

When Eun-ji brought the notice to our office, the first job wasn't strategy — it was arithmetic. We helped her pull together bank records, farm-labour pay stubs and landscaping invoices to reconstruct her actual income for both years, so the returns that finally went in reflected real numbers rather than the CRA's estimate. Once the corrected returns were filed, the arbitrary assessments were replaced, and her true tax owing came in at roughly $6,300 across the two years — a real but manageable amount for someone earning a modest, seasonal income.

The problem was everything stacked on top of that number. The CRA charges a late-filing penalty calculated as a percentage of the tax owing, plus an additional amount for each month the return stays outstanding, up to a cap. On top of that, arrears interest compounds daily on both the unpaid tax and the growing penalty from the original due date. By the time Eun-ji's corrected returns were processed, the penalties totalled about $2,900 and the accumulated interest, spread across nearly two years of compounding, came to roughly $2,000 — bringing the full amount she owed on top of her actual tax to close to $11,200.

Eun-ji had not tried to hide income or avoid the system. She had paid a professional specifically so this would not happen, checked in each spring, and had no way of knowing the filings weren't going in until the CRA told her directly. That gap — between what she reasonably believed was being handled and what had actually happened — was the basis for the next step.

What we did

1. Filed the outstanding returns first. The CRA will not consider forgiving penalties and interest on a debt that still includes unfiled years. Getting Eun-ji's two outstanding personal and GST/HST returns filed, with accurate reconstructed income, was the precondition for everything that followed — and it also corrected the inflated arbitrary assessment, which mattered as much to the final number as any later negotiation.
2. Prepared a taxpayer relief request under the Income Tax Act. The CRA has discretion to cancel or waive penalties and interest, in whole or in part, when circumstances beyond a taxpayer's control caused the delay, or where fairness otherwise supports it. We built the written submission around what actually happened: Eun-ji had engaged and paid a bookkeeper specifically to meet her filing obligations, provided her records on time each year, and had no realistic way to discover the missed filings until the CRA's notice arrived.
3. Gathered supporting evidence, not just an account of events. A relief request succeeds or fails on documentation. We helped Eun-ji assemble the bookkeeper's engagement correspondence, proof of the fee payments, the dated record drop-offs from both years, and a account of her own limited income during the affected seasons — evidence that the CRA could weigh rather than a bare narrative it had to take on faith.
4. Addressed the CRA's likely counterpoint directly. The CRA typically expects taxpayers to confirm their returns were actually filed, even when using a preparer, rather than relying on silence as confirmation. We didn't pretend that expectation was unreasonable. Instead, the submission acknowledged it and explained why Eun-ji's situation — a first-time filer with no prior experience navigating CRA correspondence, working full seasonal hours in physically demanding jobs — made that gap understandable rather than negligent.
5. Proposed a partial resolution rather than an all-or-nothing ask. Rather than requesting full cancellation of every dollar of penalty and interest, which the file's facts did not fully support, we asked the CRA to distinguish between the interest that accrued from causes entirely outside Eun-ji's control and the base late-filing penalty, which reflected her own, if unwitting, failure to confirm her obligations were met.

The outcome

The CRA's relief decision came back several months after the submission was filed, which is typical — these reviews are not fast, and Eun-ji was told to expect a wait from the outset. The result was a genuine compromise rather than a clean win. The agency cancelled almost all of the arrears interest, roughly $1,850 of the $2,000 that had accumulated, accepting that the compounding delay was substantially the result of the bookkeeper's failure rather than Eun-ji's own conduct. It declined to cancel the late-filing penalty in full, holding that Eun-ji still bore some responsibility for not confirming her returns had actually been accepted by the CRA in the intervening years, but reduced it by roughly $1,700 in recognition of the circumstances.

The net effect: Eun-ji's original tax owing of about $6,300 stood, as it always would — a relief request does not erase tax that is genuinely due. On top of that, she ended up paying roughly $1,350 in remaining penalty and interest combined, down from the original $4,900 assessed. It brought her total bill to about $7,650, against an initial demand of roughly $11,200 — a reduction of a little under $3,550.

Eun-ji also arranged a payment plan directly with the CRA to pay the remaining balance over several months rather than in one lump sum, something the agency will generally accommodate once a taxpayer's return history is current and a good-faith payment schedule is proposed. She switched to a different bookkeeper afterward, one who now sends her a written filing confirmation each year — a habit that costs nothing and closes the exact gap that caused the original problem.

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