CRA & Revenu Québec

The Penalties for Late Tax Filing

The Canada Revenue Agency expects taxpayers to submit their income tax returns by April 30 of every year, or the following business day if that date falls on a weekend or holiday. To ensure people comply with this expectation, the agency assesses a range of penalties and fines.

The Penalty for Filing your taxes late?

Filing your taxes late when you have earned a refund or don’t owe any further tax will not result in any fees or penalties. However, if you owe money and file late, the CRA charges you a penalty on the taxes owed equal to five percent plus an additional percent for each month late up to 12 months.

Taxes owed to the CRA are due the day your tax return is due. If you cannot pay the full amount, the CRA will accept late payments but charges compound daily interest on all amounts due.

If you owe taxes for several different years, all of your payments are credited toward your oldest debts.

For example, if you owe the CRA $10,000 and you file your tax return 5 months late, the CRA assesses a 10 percent penalty. This increases your tax bill to $11,000.

False Statements and Tax Evasion

If the CRA determines that you have knowingly made false statements on your tax return, you would be charged a penalty of at least $100 or 50 percent of your unpaid tax or falsely claimed credits.

Additionally, the CRA has a number of alternative ways to reassess tax returns. If the agency notices that your lifestyle is grossly inconsistent with the amount of income you report, you may face criminal convictions, fines, and even jail time for unreported income and tax evasion.

Penalties for Small Business Owners filing taxes late

As a small business owner, you may be required to file additional tax returns, such as payroll and GST/HST returns.

Failure to meet the CRA’s payroll obligations results in penalties and interest. Additionally, the agency may prosecute business owners who don’t deduct, remit or report payroll taxes. Penalties include fines of up to $25,000 and up to 12 months in prison.

As an employer, you are also required to remit information returns to the CRA regarding your employees. Filing these late incurs a $10 per day penalty if you have less than 50 returns, and significantly higher penalties if you have more employees.

If you collect GST/HST, penalties also apply for filing late. To calculate the fee for filing your GST/HST taxes late, the CRA uses the formulate A + (B x C).

In this formula, A is 1 percent of the amount you owe, B is 25 percent of A, and C is the number of months the return is late.

For example, if you owe $1,000 in GST/HST and you submit your payment three months late, you use the formula $10 + ($2.50 x 3). Your penalty is $17.50.

Voluntary Disclosures Program

The CRA offers a Voluntary Disclosures Program that allows taxpayers to remedy past returns without penalty. If you have unreported taxable income, ineligible expenses or unfiled information returns, you may be eligible for relief through the VDP.