Penalties for filing your tax return late
Failure to file return — penalties
Section 162 imposes automatic penalties for failing to file a tax return by the due date or for failing to provide required information. The standard late-filing penalty is 5% of unpaid tax plus 1% per month, up to 12 months.
Plain-language explanation
Section 162 imposes mandatory penalties when you fail to file a required tax return on time. Unlike interest (which is civil), penalties are administrative in nature and can be contested through CRA's taxpayer relief program.
Standard late-filing penalty (s.162(1)): 5% of the unpaid tax balance at the filing deadline, plus 1% of unpaid tax for each complete month the return is late, up to a maximum of 12 months. If you have a zero balance owing, there is no late-filing penalty.
Repeated failures (s.162(2)): If you were assessed a late-filing penalty in any of the three preceding years AND CRA sends you a demand to file and you are still late, the penalty doubles: 10% of unpaid tax plus 2% per month, up to 20 months.
Failure to report income (s.163(1)): If you fail to report income in two different years within a four-year period, you face a 10% federal penalty on the unreported amount (plus a corresponding provincial penalty).
Information returns (s.162(7)): Failure to file required information returns (T4, T5, T3, etc.) results in a penalty of $100 per failure or $25 per day late, whichever is more.
Taxpayer relief: Penalties can be waived by CRA under s.220(3.1) taxpayer relief provisions for extraordinary circumstances, CRA errors, or financial hardship.
Example
Tom owes $10,000 in income tax but files his return 4 months late. Late-filing penalty: 5% × $10,000 = $500 (base) + 4 months × 1% × $10,000 = $400 additional = $900 total penalty. Plus interest on the unpaid balance runs from May 1. Total cost of delay: over $1,000.
Amendment history
Significant changes to this provision. Older versions help you understand rules that applied in prior tax years.
CRA's Voluntary Disclosures Program (VDP) codified — taxpayers who proactively come forward to correct previously unreported income or omissions can avoid penalties and potentially some interest under the VDP, subject to conditions including full disclosure.
Common questions
Is there a penalty if I file late but I have a refund? +
No. The late-filing penalty under s.162(1) is based on unpaid tax. If you are getting a refund, your unpaid tax is zero, so the penalty is zero. However, you still lose the refund for the period you don't file, and time limits for certain claims may expire.
How do I get a penalty waived? +
Apply using Form RC4288 (Taxpayer Relief) citing the reason: serious illness, natural disaster, postal strike, CRA processing error, or similar extraordinary circumstance. Financial hardship alone rarely qualifies for penalty relief (it may qualify for interest relief). CRA has a 10-year limit on penalty/interest relief.
Key terms
Related sections
Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 162. — Read the official text on Justice Canada
These summaries are for educational purposes only and do not constitute legal or tax advice. Speak with a CPA for advice on your specific situation.