Federal Court Upholds CRA Tax Penalty Relief Denial for Taxpayer

Judge acknowledges taxpayer’s financial, physical, emotional challenges While accepting that a taxpayer might have a good case for a payment plan, the Federal Court affirmed the Canadian Revenue Agency’s (CRA) denial of her request for relief from penalties and interest owed for taxes filed late. In Sherring v. Canada (Attorney General), 2026 FC 1064, the applicant was a 71-year-old English language instructor residing in Saskatchewan. She did not file her 2011–16 personal tax returns on time. In 2018, the CRA issued tax assessment notices with arrears interest and late-filing penalties for 2011–16. After the applicant filed tax returns for the 2013–16 tax years, the CRA issued amended assessment notices. The applicant filed her 2017 and 2019 tax returns late. Thus, the CRA issued notices of assessment with arrears interest and late-filing penalties for 2017 and 2019. In April 2022, under s 220(3.1) of the Income Tax Act, 1985, the applicant requested relief from penalties and interest for the 2006–21 tax years based on financial hardship, medical problems, and COVID-19. In its first review, the CRA denied the tax relief request. The decision-maker observed that: Based on financial hardship, illness, emotional and mental distress, and a leg fracture in 2019, the applicant sought a review in connection with the 2011–21 tax years. On Oct. 25, 2023, the CRA rejected the tax relief request following a second review. The decision-maker noted that: The applicant applied for judicial review of the CRA’s second review decision. She argued that the CRA misunderstood her financial situation and failed to consider her age, physical limitations, and ability to keep working. The Federal Court dismissed the judicial review application and held the parties responsible for their own costs. The court saw no evidence that the CRA unreasonably denied relief from penalties and interest. The court ruled that the CRA decision-maker addressed the submissions, examined the evidence, and clearly articulated a rational conclusion that reflected the legally available scope of discretion. The Federal Court acknowledged the applicant’s financial, physical, and emotional troubles over the years. The court accepted that she might be able to negotiate a workable payment plan with the CRA to reflect her current financial circumstances. The court rejected the respondent’s request for costs due to the applicant’s circumstances. Here are some other recent tax-related decisions by the Federal Court of Canada. The Federal Court issued an Aug. 13 decision declining to extend the time for a man to apply for a judicial review of a CRA decision refusing his request to cancel his 2020–21 tax-free savings account taxes. Upon the parties’ consent, the Federal Court made a July 3 ruling setting aside a decision by a delegate of the minister of national revenue that refused LG Electronics Canada, Inc.’s request for interest relief under s. 220(3.1) of the Income Tax Act. The Federal Court issued a June 15 decision granting judicial review applications filed by immigrants from India who requested relief from tax penalties and arrears interest arising from the delayed filing of their T1135 forms, referred to as foreign income verification statements. Enjoy this story? Read the latest tax law news on the main page! The Canadian Legal Newswire is a FREE newsletter that keeps you up to date on news and analysis about the Canadian legal scene, providing targeted news and information of interest to Canadian Lawyers. Please enter your email address below to subscribe.