Filing Your Taxes Late? Here’s What You Need to Know!

Tax season has long been a busy time of year for Canadians. While filing taxes early and getting them out of the way is preferable, it’s easy to put it off and wait until the last minute to do your taxes. 

Even in a relatively uneventful year, there are countless distractions that can lead to people saying “I’ll do it tomorrow.”

But what happens if you don’t file your taxes on time? Is there a penalty for filing taxes late even if you owe nothing? Here are a few things you should know before you consider filing a late tax return.

The Tax Deadline in Canada

First and foremost, it’s important to know what the tax deadline is in Canada. For most Canadians, the personal income tax filing deadline is April 30. For Canadians who are self-employed (or their spouse/common-law partner is self-employed), the deadline to file tax returns is June 15.

However, if you end up owing taxes on your tax return, your self-employed income tax, or if your spouse/common-law partner is self-employed, your taxes have to be paid by April 30 to avoid CRA interest charges. So, it's best to file your taxes by the standard April 30 deadline, even if you're self-employed—just in case you owe.

What Happens if You File Your Taxes Late in Canada?

If you file a late tax return, the Canada Revenue Agency (CRA) does have a procedure in place for accepting late tax returns from Canadians.

However, you should know that filing taxes late in Canada may cause you to be subjected to CRA penalties, interest charges, and/or the (temporary) loss of certain government benefits until your taxes are filed and processed.

Common Misconceptions Around Canadian Taxes

Some Canadians can get confused about tax requirements and procedures. Here are three common misconceptions we often hear from clients:

MYTH: Filing your taxes each year is a “guideline” not a law.
Filing taxes in Canada is a legal requirement for all Canadians. You’re expected to do it every year or risk financial penalties or withholding of government benefits and programs. 

MYTH: Taxes only matter if you owe or are owed money.
It doesn’t matter whether you owe money or are expecting a refund. Taxes impact your government benefits and potentially your credit score (if you owe). It’s good practice to file every year to avoid falling behind or facing penalties.  

MYTH: The CRA won’t notice if I don’t file or file late.
They notice. Failure to file will result in mailed notices or phone calls until you file and pay your balance.

What Is the Penalty for Filing Taxes Late in Canada?

If you owe taxes on your tax return, the CRA interest charges will compound daily starting May 1, on any amounts you owe. How much is the interest? The CRA will charge a 5% late tax filing penalty if you file your taxes after the deadline and you owe taxes. Then on top of that, they will charge an extra 1% for every month it's late, up to a maximum of 12 months, on any taxes you owe. 

For example, say you owed $1,000 and filed late. If you filed on June 1, the CRA would charge a 5% late penalty for missing the filing deadline. This would add an extra $50 to the total amount you owe. Then, they would charge another 1% for May, which works out to about $10 (or roughly $10.50 due to compound interest) for the extra month. That’s over $60 of extra money owed to the CRA just for filing late. 

If you're a repeat offender and were charged a late filing penalty on any of your last three tax returns, the CRA may increase that late penalty from 5% to 10% on any amount you owe. Plus, they may charge an additional 2% (instead of 1%) on what you owe for every month your tax return is late, up to 20 months. 

The best tax debt management strategy is to file your taxes on time, even if you can’t pay at the time you file. If you can't pay your balance to the CRA in full, you can work with the CRA to arrange a debt payment plan to pay off your personal income tax debt (plus interest) over a longer period of time through what's called a payment arrangement.

What Should You Do if You Miss the Tax Deadline?

If you miss the deadline, don’t panic, but make sure to file your tax return as soon as possible. Pay what you owe. By missing the deadline, you’ll be charged a 5% penalty, plus 1% for every complete month past due, but the sooner you pay your taxes, the better.

If you’ve missed several years of tax filing, you can minimize CRA penalties and ask about tax interest relief:

1. Call the Income Tax Enquiries Line at 1-800-959-8281.

2. Request mailed copies of all your T4s and a personalized remittance voucher for your balance owing.

3. If you experienced financial hardship that prevented you from filing or paying, submit an RC4288 form to ask to cancel or waive penalties and interest.

4. As soon as your paperwork comes in, do your taxes right away, before you forget or get distracted. 

Is There a Penalty for Filing Taxes Late if You Owe Nothing?

So, what happens if you file late with the CRA, but you don’t actually owe any money? Filing taxes late when you don’t owe may not result in any CRA interest charges, since they can’t apply interest on money you don't owe. 

What happens if I don't file my taxes, but I don't owe anything?

It’s a good practice to always file, even if you don’t owe money. For starters, if the CRA owes you money, you won’t receive it until your taxes have been filed. The government uses your tax filings to determine your eligibility for government benefits and programs, so failure to file may result in your benefits and payments (including your GST/HST rebates and Child Tax Benefits) being cancelled. 

What happens if I file taxes late but don't owe anything?

Again, get in the habit of filing on time, no matter your situation for that tax year. If you file late and don’t owe anything, you likely won’t be charged any CRA penalties, but any rebates or benefits may be paused or cancelled until the filing has been received. 

How Late Filing Affects Your Government Benefits

If you receive government benefits, you must file an annual tax return to keep receiving them uninterrupted. The government uses tax return information to verify eligibility for certain assistance programs. If you fail to file your taxes on time, your coverage under these programs may lapse.   

Here are common government benefits that may be affected if you don’t file:

• Canada Child Benefit (CCB)
• GST/HST credits
• Guaranteed Income Supplement (GIS)
• Old Age Security (OAS) supplement
• Other provincial benefits

If the government owes you money and you’re late filing, you don’t get your tax refund until you file. You should also know that other benefits in different provinces and territories may also be affected if taxes aren’t filed on time.

Can You File Multiple Years of Taxes Together in Canada?

What should you do if you haven’t filed your taxes in years? Software programs online can help with filing taxes for previous tax years. You can also request income tax packages for previous years from the CRA. Remember: it's best to contact them first before they have to track you down. 

The CRA has a Voluntary Disclosures Program (VDP) that can help individuals who haven't filed a tax return for previous years. It can also help those who need to correct information on a tax return they have already filed. If the CRA accepts your VDP application, you could qualify for some relief on tax debt interest or other penalties by voluntarily reporting errors or omissions in your tax filings before the CRA discovers or contacts you about them. 

The CRA also offers tax interest relief through taxpayer relief provisions, where they waive penalties or interest for people who couldn't meet their tax obligations for certain reasons. This includes financial hardships, and circumstances beyond your control, like a serious health issue or natural disaster.

How Long Can You Go Without Filing Your Taxes in Canada?

If you owe taxes, you must pay your taxes for that tax year to avoid penalties or legal complications. If you need relief, the CRA can waive certain fees for a maximum of 10 years. Otherwise, you’ll face the penalty for filing taxes late in Canada.

There are also long-term effects of not filing your taxes on time, including:

• The CRA adding liens to your assets (home, car, savings)

• A flag on your passport prevents you from leaving the country

• Adding to your credit report under the “Public Record”, impacting your credit score

• Calls, letters, and potential harassment from the CRA until you’ve paid

• Stress leading to poor choices, job performance, or relationship struggles

So, while you may have some fees waived, the longer you don’t file your taxes, the more likely the above legal consequences may happen to you.

How Far Back Can CRA Audit?

Generally, the CRA can audit tax returns within four years of the Notice of Assessment. Reassessments can be completed within three years. If the CRA thinks there might be a significant error or omission on your return, such as providing incorrect information, they may extend the audit period to 6 years. 

In cases where the CRA determines that you have no reported income, there may be no time limit for assessing tax owed. This means they can audit back indefinitely until the unreported income is resolved. It's recommended to keep the records for at least 6 years after the end of the tax year. This way, you'll have all the necessary documents ready just in case the CRA decides to take a closer look at your return.

What Happens if You Don’t Pay Your Taxes in Canada?

If you don’t pay your taxes in Canada, the first thing that happens is that the CRA begins assessing the penalties and CRA interest charges mentioned earlier. Then, after about 90 days from the date they send you their notice of assessment, the CRA may begin to take legal action, starting with an attempt to give you a verbal warning by phone and a written legal warning letter.

Some of the legal actions the CRA may take include:

• Garnishing your wages to collect the outstanding tax debt
• Redirecting funds from other government benefits you would normally receive to cover what you owe
• Putting a lien on your assets (in extreme cases)
• Seizing and selling assets to pay off what you owe (again, in extreme cases)

To avoid this, it’s usually best to file your taxes as soon as possible. If you cannot pay your taxes in full at the time of filing, contact the CRA and make arrangements to pay them on a schedule that works with your budget. This can help avoid wage garnishments, or worse. 

Do you need help with tax debt management? Are you worried about dealing with any taxes that you owe and other forms of debt, like credit card debt? 

Contact or call us at 1 (800) 267-2272 for a free Debt Assessment. We’lle review the options you have to pay off any unsecured debts you owe. 

What to Do if You Can’t Pay Your Taxes

If for any reason you can’t pay your taxes by the annual April 30th deadline, there is support for tax debt management. With the CRA, you have two options:

CRA Payment Arrangements Online

You can make arrangements to pay the CRA amount you owe over time through a Payment Arrangement. You can schedule these yourself through your CRA online account through a pre-authorized debt (PAD) agreement. Simply login to your account and follow the prompts to enter your amounts, frequency, and banking information. 

Negotiate a Debt Payment Plan

You can also call the CRA to negotiate a payment plan based on your financial circumstances. Call the number provided on any CRA letters or collections notices you’ve received. 

Remember that any payments made after the payment deadline are subject to interest payments until the full amount has been paid. The sooner you’re able to pay your outstanding balance, the less the debt will grow. 

How to Avoid Late Filing in the Future

Want to avoid missing tax deadlines? Avoid late filing by:

• Setting electronic reminders
• Submitting installment payments
• Using CRA-approved software

Are you scared of filing taxes late? Try to negotiate with the CRA by:

• Explaining your financial situation
• Asking for an extension
• Setting up a debt payment plan

For more tax advice, Neal Winokur, author of The Grumpy Accountant shared these tips for filing your taxes on time on Credit Canada CEO Bruce Sellery’s Moolala: Money Made Simple podcast:

“Try and stay on top of it throughout the year. So for example, you’re allowed to keep scanned copies of all of your receipts and documents. People don’t know that. So a lot of people get very scared and frustrated at tax time because they have to look through piles of receipts and documents and they put it all off until March or April, and then they have to spend hours and hours going through piles and boxes of documents, which is a crazy system. 

All you have to do is, as soon as you get a receipt in the middle of the year, just scan it in, keep a folder on your computer and you can call the folder tax documents. And then at the end of the year, it’s all ready to go. It’s all right there, scanned in. And you can send it to your accountant, or if you file your own taxes, you have everything right there. You’re organized and you’re on top of it throughout the year. And then at the end of the year, it’s a lot easier for you.”