Interest and penalties

Find out when interest is charged and how penalties are applied. 

Interest

Interest on taxes owing

If you have a balance owing for the current tax year and are unable to pay it by the April 30 payment due date, the CRA will start charging you compound daily interest as of May 1, 2021. This includes any balance owing if your return has been reassessed.

The rate of interest the CRA will charge on current or previous balances can change every 3 months based on prescribed interest rates.

Interest relief if you received COVID-19 benefits

Interest relief on 2020 taxes owing will be given to people who have a total taxable income of $75,000 or less and received at least one COVID-19 benefit in 2020.

For details: Eligibility criteria for interest relief

Interest on tax instalment

If the CRA requires you to pay tax instalments, you will need to pay by the set instalment payment due dates. If you miss any of these payment dates, you may need to pay instalment interest.

For details: Instalment interest charges

Penalties

Late-filing penalty

The late-filing penalty is applied if you file your tax return after the due date and have a balance owing. If you cannot pay your balance owing, you should still file on time to avoid being charged the late-filing penalty.

The late-filing penalty is 5% of your 2020 balance owing, plus an additional 1% for each full month you file after the due date, to a maximum of 12 months.

If the CRA charged a late-filing penalty for 2017, 2018, or 2019 and requested a formal demand for a return, your late-filing penalty for 2020 will be 10% of your balance owing. You will be charged an additional 2% for each full month you file after the due date, to a maximum of 20 months.

Repeated failure to report income penalty

You may have to pay a federal and provincial or territorial penalty if you failed to report an amount of $500 or more in both:

  • 2020 tax return
  • 2017, 2018, or 2019 tax return

The penalty is whichever one is less:

  • 10% of the amount you failed to report (federal and provincial or territorial)
  • 50% of the difference between:
    • the understated tax or overstated credits of the amount you failed to report
      and
    • the tax withheld from the amount you failed to report

The CRA may grant you penalty relief, if you voluntarily disclose amounts you failed to report and/or credits you overstated before the CRA contacts you or anyone who is related to you.

For details: Voluntary Disclosures Program

Exceptions to the federal and provincial or territorial penalties

There are 2 exceptions:

Quebec residents

Only the federal penalty will be applied as the provincial tax is assessed by Revenu Québec.

Non-residents and deemed residents of Canada

The provincial or territorial penalty will be applied only if provincial or territorial tax is payable.

False statements or omissions penalty

You may have to pay a penalty if you knowingly or under circumstances amounting to gross negligence, made a false statement or omission on your 2020 return.

The penalty is whichever is greater:

  • $100
  • 50% of the understated tax and/or the overstated credits related to the false statement or omission

The CRA may grant you penalty relief, if you voluntarily disclose amounts you failed to report and/or credits you overstated before the CRA contacts you or anyone who is related to you.

For details: Voluntary Disclosures Program

Tax instalments penalty

You may have to pay a penalty if your instalment payments are late or less than the required amount. We apply this penalty only if your instalment interest charges for 2021 are more than $1,000.

For details: Instalments penalty charges

Cancel or waive penalties or interest

Under taxpayer relief provisions, the CRA has the discretion to cancel or waive penalties or interest. This applies when taxpayers are unable to meet their tax obligations due to circumstances beyond their control.

The CRA can only grant relief within a 10 year span from your request date.

Interest

Only considered for interest on a balance owing for a tax year that accrued within 10 years prior to your request.

For example: Your request made in 2021 must relate to interest that accrued after 2011.

Penalties

Only considered if your request relates to a tax year within 10 years prior to your request.

For example: Your request made in 2021 must relate to a penalty for a tax year ending after 2011.

To make a request fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest.

For details: Taxpayer relief provisions

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