CRA Penalties and Interest: What Late Filing Actually Costs
late-filing penalty structure, repeated failure and arrears interest
The Canada Revenue Agency's late-filing penalty on income tax returns 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 doubles that to 10% plus 2% per month for up to 20 months, with compound daily arrears interest accruing on top.
What is the late-filing penalty?
5% of the balance owing plus 1% for each full month the return is late, capped at 12 months — a maximum of 17% of the balance. The same structure applies to both T1 and T2 returns.
| Filing | Applies to | Filing deadline | Payment | If it is late |
|---|---|---|---|---|
| T1 personal income tax return | Most individuals. | File and pay by April 30 of the following year. Where April 30 falls on a weekend or public holiday, the CRA treats the next business day as on time. | Any balance owing is due April 30. | Late filing costs 5% of the balance owing plus 1% for each full month late, to a maximum of 12 months. Where a late-filing penalty applied in any of the three prior years and the CRA issued a demand to file, the penalty rises to 10% plus 2% per month for up to 20 months. Compound daily interest runs on unpaid balances from May 1. |
| T2 corporation income tax return | Every resident corporation, every tax year, even with no tax payable. | File within six months after the end of the corporation's tax year. Where the year-end is the last day of a month, the return is due the last day of the sixth following month; otherwise it is due the same day of the sixth month. | The balance of tax is due earlier than the return: generally two months after year-end, or three months for eligible Canadian-controlled private corporations claiming the small business deduction. Filing on time is not paying on time. | 5% of the unpaid tax plus 1% per complete month late, to a maximum of 12 months. Repeated failure raises it to 10% plus 2% per month for up to 20 months. |
The repeated-failure 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 rises to 10% of the balance plus 2% per month for up to 20 months — a maximum of 50%.
Arrears interest: the quieter cost
Interest compounds daily on unpaid balances from the payment due date at the CRA's prescribed rate, which is set quarterly. State the mechanism rather than a rate — the prescribed rate moves, and a stale number on a client-facing page is worse than none.
Information-return penalties are different
T4, T4A, T5 and NR4 penalties are graduated by slip count and days late, with a $100 minimum and a $7,500 maximum. T5013 partnership returns carry the greater of $100 and $25 per day to a maximum of 100 days. Payroll remittance penalties run on a separate 3%/5%/7%/10% tier by days late, rising to 20% for a knowing repeat failure in the same year.
| Filing | Applies to | Filing deadline | Payment | If it is late |
|---|---|---|---|---|
| T4, T4A and T5 information returns | Every employer (T4), payers of pensions, annuities and fees for services (T4A), and payers of investment income (T5). | File the slips and summary with the CRA and distribute copies to recipients by the last day of February following the calendar year. Where that date falls on a weekend or public holiday, the next business day applies — compute the shifted date rather than assuming it. | Not applicable | A graduated late-filing penalty based on the number of slips and days late: a minimum of $100 and a maximum of $7,500, on a per-day scale that rises by tier. It is not a flat per-slip amount. |
| Payroll source deduction remittances | All employers. Frequency is set by the average monthly withholding amount (AMWA) from two years prior. | Quarterly remitters (AMWA under $3,000 with a clean compliance record, and eligible new small employers) remit by the 15th of the month after each calendar quarter. Regular remitters (AMWA under $25,000) remit by the 15th of the month following the month deductions were made. Accelerated Threshold 1 remitters (AMWA $25,000 to $99,999.99) remit by the 25th for pay periods ending the 1st to 15th, and by the 10th of the following month for periods ending the 16th to month-end. Accelerated Threshold 2 remitters (AMWA $100,000 or more) remit within three working days after each of four weekly periods, through a Canadian financial institution. | Not applicable | 3% for amounts one to three days late, 5% for four to five days, 7% for six to seven days, and 10% where more than seven days late or not remitted. A second or subsequent failure in the same calendar year, made knowingly or through gross negligence, carries a 20% penalty. |
| T5013 partnership information return | Partnerships that meet the CRA's filing criteria. | Where all partners are individuals, file by March 31 following the calendar year in which the fiscal period ended. Where all partners are corporations, file within five months of the fiscal period end. Where the partnership has both, file by the earlier of March 31 and five months after year-end. | Not applicable | The greater of $100 and $25 per day, to a maximum of 100 days — up to $2,500 per failure. |
Taxpayer relief
The CRA may cancel or waive penalties and interest under the taxpayer relief provisions in defined circumstances, generally within a limited lookback period. Relief is discretionary and evidence-driven — the request needs documentation, not an explanation.
When the deadline was the firm's to manage
A firm that accepted responsibility for a filing and missed it is exposed commercially and professionally, whatever the client's own conduct. This is the practical argument for a system rather than a spreadsheet: the record of who owned the deadline and what was communicated is itself the defence.
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 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.
Does the CRA charge interest as well as penalties?
Yes. Arrears interest compounds daily on unpaid balances from the payment due date at the prescribed rate, which the CRA sets each quarter. Interest applies to unpaid penalties too, so the two costs compound together.
Can CRA penalties be cancelled?
The CRA may cancel or waive penalties and interest 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.
Is there a penalty for filing a nil return late?
The percentage penalty is calculated on the balance owing, so a nil balance produces no percentage penalty — but a corporation is still required to file, and repeated non-filing invites a demand to file, which unlocks the higher repeated-failure tier on any future balance.
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