What Late Filing Actually Costs: CRA Penalty Math for T1, T2 and Slips
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The CRA's late-filing penalty is 5% of the balance owing plus 1% for each full month late, to a maximum of 12 months. Repeated failure within the lookback period can double that to 10% plus 2% per month for up to 20 months — with daily-compounded arrears interest accruing on top.
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The base penalty formula
5% of the balance owing plus 1% for each full month the return is late, capped at 12 months — a maximum of 17%. It applies to both T1 and T2 returns.
Repeated failure: the doubled tier
Where a late-filing penalty applied in any of the three preceding tax years and the CRA issued a demand to file, the penalty becomes 10% plus 2% per month for up to 20 months — a maximum of 50% of the balance.
Interest: the quieter cost
Arrears interest compounds daily from the payment due date at the CRA's prescribed rate, which is set quarterly. Interest also applies to unpaid penalties, so the two compound together.
Information returns: a different structure
T4, T4A, T5 and NR4 penalties are graduated by slip count and days late, from a $100 minimum to a $7,500 maximum. T5013 partnership returns carry the greater of $100 and $25 per day to a maximum of 100 days.
GST/HST has its own formula
A + (B × C): 1% of the amount owing, plus 0.25% of that amount per complete month late to a maximum of 12 months, with a further $250 where the return follows a demand to file.
Taxpayer relief: when and how to ask
The CRA may cancel or waive penalties and interest in defined circumstances under its taxpayer relief provisions, within a limited lookback period. Relief is discretionary and documentation-driven — an explanation without evidence rarely succeeds.
The firm's exposure when the deadline was the firm's to manage
Where the firm accepted responsibility for a filing and missed it, the exposure is commercial and professional whatever the client's own conduct. A defensible record of who owned the deadline and what was communicated is worth having before it is needed.
Frequently asked questions
What is the CRA late filing penalty?
5% of the balance owing plus 1% for each full month the return is late, to a maximum of 12 months — up to 17% of the balance. Compound daily arrears interest accrues separately on the unpaid amount from the payment due date.
What is the repeated failure to file penalty?
Where a late-filing penalty applied in any of the three preceding tax years and the CRA issued a demand to file, the penalty rises to 10% of the balance owing plus 2% for each full month late, to a maximum of 20 months.
What is the penalty for a late GST/HST return?
A + (B × C): 1% of the amount owing, plus 0.25% of that amount for each complete month the return is late, to a maximum of 12 months. A further $250 applies where the return is filed after the CRA has demanded it.
Can CRA penalties and interest be cancelled?
The CRA may cancel or waive them under its taxpayer relief provisions in defined circumstances, subject to a limited lookback period. Relief is discretionary and requires supporting documentation rather than an explanation of what happened.
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