What filing late actually costs — and the move that caps it.
The penalty math is public, mechanical, and worse than most people assume — but it has one merciful property: it is triggered by filing late, not by paying late. That distinction is worth real money.
Updated August 2026 · Reviewed by the VertAcc accounting team · Ottawa, Canada
The deadlines the clock runs from
- Personal (T1): April 30. If you or your spouse are self-employed, the filing deadline extends to June 15 — but any tax owing is still due April 30, and interest on it starts May 1.
- Corporate (T2): six months after your year-end, with the balance due at two or three months — the two-clock problem explained here.
The penalty math
File late with a balance owing and the CRA charges 5% of the unpaid tax immediately, plus 1% for each full month late, up to 12 months — a ceiling of 17% stacked on top of what you already owed. Charged a late-filing penalty in a recent prior year and late again? The repeat rate is 10% plus 2% per month up to 20 months — a possible 50%.
Interest runs separately, compounding daily on the unpaid tax and on the penalty, at the CRA’s prescribed rate — which resets quarterly and has been painful for several years now.
Owe $20,000 and file six months late as a first offence: $1,000 + $1,200 = $2,200 in penalty before a dollar of interest. As a repeat offence the same six months costs $4,400. The return itself would have cost a fraction of that to prepare on time.
The move: file even when you cannot pay
The late-filing penalty exists only if the return is late. File on time with an unpaid balance and you owe interest — nothing else. That means the correct move in a cash crunch is always the same: file anyway, then arrange payment with the CRA separately. People conflate “can’t pay” with “shouldn’t file,” and that conflation is the single most expensive tax mistake a small business makes.
Why lateness is usually a bookkeeping problem
Almost nobody misses a deadline out of indifference. Returns go unfiled because the books behind them are a shoebox — and every month of avoidance makes the shoebox scarier. That is a solvable problem with a known shape: catch-up bookkeeping, then the returns in order, then a monthly close so it never rebuilds. If you want a quick read on how far behind you actually are, the two-minute books health check was built for exactly this moment.
The short version of working with us
VertAcc is an Ottawa accounting firm that writes its own software. Bookkeeping, tax, payroll and year-end run on a fixed monthly fee — no hourly meter, calls never billable, and the accounting platform is included with setup done free. If your books are behind or a deadline on this page is already past, that is ordinary work for us, not a judgement.