The Real Cost of Missing Tax Deadlines
Filing late isn't just stressful—it's expensive. The CRA charges penalties and compound daily interest on any amount you owe.
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Key Takeaways
- Late filing penalty: 5% + 1% per month (max 12 months)
- Interest compounds daily on unpaid amounts
- Repeat offenders face doubled penalties
- Filing on time is critical—even if you can't pay
Late Filing Penalties
First Time Late
5% of balance owing + 1% for each full month late (maximum 12 months = 17% total)
Repeat Offender
10% of balance owing + 2% for each full month late (maximum 20 months = 50% total!)
Interest Charges
CRA charges compound daily interest on unpaid taxes. The rate changes quarterly based on the Bank of Canada rate and is typically 8-10% annually.
Example: $10,000 owed, filed 3 months late
Late filing penalty: $500 + $300 = $800
Interest (3 months at ~9%): ~$225
Total extra cost: $1,025
Late filing penalty: $500 + $300 = $800
Interest (3 months at ~9%): ~$225
Total extra cost: $1,025
Always File On Time
Even if you can't pay, file on time! You'll avoid the late filing penalty and only pay interest on the balance.
Gross Negligence
If CRA determines you knowingly failed to report income, penalties can reach 50% of the understated tax.
Behind on Your Taxes?
Tax Punjabi can help you catch up and minimize penalties.