If you've missed a filing deadline — this year's or one from a few years back — the numbers are usually less catastrophic than people assume, but only if you deal with it deliberately instead of avoiding it. Here's what actually happens, and what to do next.
What it actually costs
If you owe money and file late, the CRA charges a late-filing penalty of 5% of the balance owing, plus 1% for every full month the return is late, up to 12 months. If you were also late in any of the previous three years and the CRA had already requested that return, the penalty doubles to 10% plus 2% per month, up to 20 months. On top of the penalty, the CRA charges compound daily interest on the unpaid balance, at a rate it sets and adjusts every quarter.
Here's the part people miss: if you're owed a refund, or your balance is zero, there's no late-filing penalty at all. The penalty is tied to a balance owing, not to the act of filing late by itself. That said, a refund doesn't arrive until you file, so there's no upside to waiting either way.
Several years behind
If it's been more than one year, each return is generally still assessed on its own, but a pattern of late filing is what triggers the doubled penalty. If you haven't filed in several years and are worried about penalties stacking up or about the CRA's compliance actions, the CRA's Voluntary Disclosures Program can, in qualifying cases, reduce or eliminate penalties and prosecution risk for taxpayers who come forward before the CRA contacts them first. Whether a file qualifies depends on the specifics, and it's worth a real conversation before you apply rather than assuming either way.
What to actually do
File as soon as you reasonably can, even if you can't pay the full balance right away — the penalty is for filing late, not for paying late, and it stops growing once the return is in. Gather what you have (see our guide on what to bring to a first meeting), don't wait for perfect records, and talk to your accountant about a payment arrangement with the CRA if the balance is more than you can pay at once. Waiting for the "right time" to deal with it is almost always the most expensive option. If you're behind and not sure where to start, contact us — that first conversation is the hardest part, and it gets easier from there.