CRA will charge you compound daily interest on any unpaid amounts you owe. In addition, CRA will charge you interest on the penalties starting the day after your filing due date. Rate of interest CRA charges can change every three months.
Late – filing penalty
If you owe tax and file your return after the due date, CRA will charge you a late filing penalty. Penalty is 5% of the balance owing, plus 1% of your balance owing for each full month your return is late. Maximum you may be charged is for 12 months.
If CRA charged a late-filing penalty for the past 3 years, your current year’s penalty may be 10% of the balance owing, plus 2% of your current balance owing for each full month your return is late, to maximum of 20 months.
You can avoid the late-filing penalty by filing your return on time.
Repeated failure to report income penalty
If you failed to report an amount on your return for 2017 and you also failed to report an amount on your return for 2014, 2015, or 2016, you may have to pay a federal and provincial or territorial repeated failure to report income penalty. If you did not report an amount of income of $500 or more for a tax year, it will be considered a failure to report income.
The federal and provincial or territorial penalties are each equal to the lesser of:
10% of the amount you failed to report on your return for 2017; and
50% of the difference between the understated tax (and / or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.
False statements or omissions penalty
You may have to pay a penalty if you, knowingly or under circumstance amounting to gross negligence, have made a false statement of omission on your return.
The penalty is equal to the greater of:
$100; and
50% of the understated tax and/or the overstated credits related to the false statement or omission.
Cancel or waive penalties or interest
The CRA administers legislation, commonly called the taxpayer relief provisions, that gives CRA discretion to cancel or waive penalties or interest when taxpayers are unable to meet their tax obligations due to circumstances beyond their control.
The CRA’s discretion to grant relief is limited to any period that ended 10 calendar years before the year in which a request is made.
For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request.
For interest on balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request.
To make a request fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest.
Mansoor Suhail has been providing Accounting, Bookkeeping and Taxation services since 2001 in Toronto, Canada. He is fully competent in Canada and U.S.A tax filings and consultation. He can handle Personal, Small Business, Partnerships and Corporations tax issues with full confidence. He is also able to handle International tax issues for Foreign Students, Expatriates and Foreign Corporations.
