CRA Penalties and Interest

The Canada Revenue Agency can charge interest and penalties on income tax and GST/HST returns.

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CRA Interest and Penalties for Income Tax and GST/HST Returns

 

Taxpayers (both individuals and companies) must abide by many Canada Revenue Agency (CRA) requirements. These include following deadlines and due dates for income tax and GST/HST returns, due dates for making payments to the CRA (both for installments and balances owing), filing complete and accurate returns, and more.

If a taxpayer fails to comply with these requirements, the CRA may change penalties and interest charges. Depending on the situation, a tax balance owing can grow quite significantly depending on the penalties and interest charged.

 

Possible CRA Interest and Penalties for Income Tax Returns

 

The CRA is able to charge penalties and interest on income tax returns, including:

  • Interest on an unpaid balance
    • If you owe tax debt, you will be charged compound daily interest on the amount owed, including interest on any penalties that have been charged. Interest rates are published on the CRA website and the CRA can change the rate of interest every three months.
  • Late filing penalty
    • You must file your tax return on time. If you owe money and do not file your return on time, you will be charged a late-filing penalty. This penalty is currently 5% of the outstanding balance owing, plus 1% for each full month that your return is late, up to a maximum of 12 months.
    • If you have filed late repeatedly, this penalty may crease to 10% of your balance owing, plus 2% for each full month, to a maximum of 20 months.
  • Repeated failure to report income penalty
    • If you do not accurately report an income on your tax return (either on purpose or in error) and you also failed to report an income in any of the three previous years, you may be charged a failure to report income penalty.
    • The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your current return.
  • Omissions or false statements penalties
    • If the CRA believes that you knowingly made a false statement or omission on your tax return, or if the agency believes that you were negligent when completing your return, you can be charged a penalty. This penalty will be equal to the greater of:
      • $100, or
      • 50% of the understated and/or overstated credits related to the omission or false statement

 

Possible CRA Interest and Penalties for Income Tax Returns

 

The CRA can charge interest on GST/HST returns in situations where:

  • There is an overdue balance owing on a return;
  • You have made late or insufficient installment payments;
  • There is an overdue amount on the GST/HST that you have to remit to the Receiver General

The CRA also has several penalties that it can charge in relation to GST/HST returns, such as:

  • Failure to file any return with a balance owing, or filing such a return late
  • Failure to file after receiving a Demand to File
  • Failure to file electronically
  • Failure to accurately report information

Having CRA Interest and Penalties Reduced

 

If you have been charged interest and penalties by the CRA, or if you believe that you will be charged CRA interest and penalties, you should speak with a qualified and experienced tax expert. There are situations where taxpayers may be able to have CRA interest and penalty charges reduced or eliminated. Please contact Farber Tax Solutions today for more information.

Farber Tax Solutions Helps You at Every Step of the Way including:

  • 1| Organizing: We analyze all documents and communication, to fight the CRA on your behalf
  • 2| Audits: We assist you with audits and ensure proper conduct by tax authorities
  • 3| Appeals: We can prepare a Notice of Objection, clarifying your standing with the CRA
  • 4| Litigation: We represent you at all levels of court

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