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Late Tax Returns & Payments - Penalties & Interest
If your return is late and there is a balance owing, you
will be subject to interest and late-filing penalties. Interest is
charged on the outstanding balance starting the day after the due
date of the taxes payable, and is compounded daily.
Interest on Overdue Balances
Income Tax Act s. 161(1)
After you file your tax return, you will receive an assessment notice from
CRA
which shows the balance of tax owing. After the payment deadline of
April 30th,
interest will accrue on this balance at the CRA prescribed rate of interest, compounded
daily. The current interest rates can change quarterly, and can be found on the CRA prescribed
interest rates page.
Re 2024 tax returns: See next topic re arrears interest relief.
Penalty for Filing Your Return Late
Income Tax Act s. 162(1), (2)
2024 Tax Return Relief: The CRA will
grant relief in respect of late-filing penalties and arrears interest until June
2, 2025, for "impacted" T1 (personal income tax return) individual
filers. Impacted filers are those reporting capital dispositions (gain
or loss) on Schedule 3 of their tax return. The relief is not extended to
spouses of impacted filers.
Note that if the tax return is filed and taxes remitted on June 3rd or later,
NO relief will be provided from penalties and interest.
As of April 29, 2025, many 2024 tax returns can not yet be filed
electronically and many tax slips are still missing, but no relief has been
announced except for "impacted filers".
The late filing penalty is 5% of the balance owing, plus
1% of the balance owing for each full month that your return is late, to a
maximum of 12 months (that would be a total penalty of 17% of the balance
owing).
If you have incurred late-filing penalties in any of the three
preceding taxation years, your late filing penalties are doubled. You'll be
charged 10% of the balance owing, plus 2% of the balance owing for
each full month that your return is late, to a maximum of 20 months. For more
information, see the CRA web page Interest
and the late-filing penalty (link at bottom).
Tax Tips:
Always file your tax return on time, even if you can't afford to pay the
tax.
Pay your tax as soon as you can!
How to File a Late Return
For dates and hours of NetFile and EFile availability, see
our article on Tax Filing Methods.
Most
late returns can be filed this way, using your income tax software.
Late returns can always be filed by sending a printed
or manually prepared return to CRA. Forms are
available from the CRA General
Income Tax and Benefit Package web page.
Telefile is no longer available for filing tax
returns.
For information on time limits for late returns and
circumstances under which the interest and penalties may be waived, see
the article on taxpayer relief (fairness) provisions.
Interest and Penalties on Late or Insufficient Instalment Payments
Interest at the prescribed rate, which is the same as the prescribed rate
(see above - 10% starting January 1, 2024) for overdue balances, will be charged,
compounded daily, on late or
insufficient instalment payments. A penalty may be charged if instalment
interest for the year is more than $1,000.
Tax instalments are due by the
15th of March, June, September and December, except for those whose main
source of income is from farming or fishing. In that case, one instalment
payment is due on December 31st.
Although CRA may send you an instalment
notice, if you know that the instalments are not going to be needed because
you'll have lower income in the year, it is not necessary to make the
payments. However, if you miscalculate and find you should have paid
instalments, you will be charged interest.
Sometimes an election is required to be filed with an income tax
return. When a request is made to late-file an election, a penalty can be
imposed @ $100 per month x the number of months that the election is late, to a
maximum of $8,000. This also applies to the designation of a principal
residence in order to claim the Principal
Residence Exemption when your home has been sold. The sale of your
home must be reported on your personal income tax return - this is a new CRA
administrative policy effective for the 2016 and later taxation years. If
you are late in reporting, you will be subject to penalties!
False
Reporting or Repeated Failure to Report Income
Penalties will be increased if a taxpayer falsely reports or omits reporting
income, and for repeated failure to report income.
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