Consequences of Not Filing Taxes for Years (and How to Catch Up Safely)

Introduction

Failing to file taxes for several years is more common than people think. Life events—illness, financial stress, divorce, mental health struggles, business failure, immigration issues, or simple overwhelm—can cause taxpayers to fall behind. But unfiled tax years create escalating problems: penalties, interest, frozen bank accounts, wage garnishments, loss of benefits, missed refunds, and aggressive CRA collections. Fortunately, there are safe and legal ways to catch up, avoid prosecution, eliminate penalties, and regain full compliance. This guide explains what happens when you haven’t filed for years and how to fix it properly without triggering a CRA audit.

Why People Fall Behind on Filing

Missing tax years often occur due to:
illness or medical hardship
mental health issues
family crises
loss of employment
immigration and residency confusion
backlog from self-employment
fear of owing money
complex investment or crypto records
lack of bookkeeping
misplaced slips or missing documents
CRA understands that non-filing is often caused by life events—not intentional avoidance.

What Happens When You Don’t File for Years

1. CRA Estimates Your Income

CRA can issue arbitrary assessments based on:
past income
industry averages
third-party data
bank deposit analysis
These assessments are often much higher than your real income.

2. Interest Accumulates Daily

Interest compounds every day—even if CRA’s estimate is wrong. This can turn a small tax balance into a major debt.

3. Penalties Accumulate

Late-filing penalties
late-payment penalties
repeat-failure penalties
gross negligence penalties (in serious cases)
GST/HST penalties for businesses
Penalties often exceed the tax owing.

4. CRA Can Freeze Your Bank Account

CRA’s collections division can send a Requirement to Pay (RTP) to your bank, freezing available funds.

5. CRA Can Garnish Your Wages

CRA can contact your employer and seize a portion of each paycheque before you receive it.

6. You Lose Access to Benefits

Canada Child Benefit (CCB)
GST/HST credit
Disability benefits
Pension income supplements
Benefits stop until ALL late returns are filed.

7. You Cannot Obtain Mortgages or Loans

Banks require proof of income via:
Notices of Assessment
T1 Generals
corporate financial statements
Unfiled returns stop financial progress.

8. Businesses Risk GST/HST and Payroll Enforcement

CRA may:
assess unfiled GST/HST returns
apply payroll penalties
freeze business accounts
place liens on assets
Non-filing businesses face severe consequences.

CRA Eventually Finds Out

CRA receives data from:
employers
banks
crypto exchanges
foreign governments (CRS/FATCA)
rental platforms
delivery platforms
Real estate registries
Missing returns eventually trigger enforcement.

How to Catch Up Safely (Without Triggering an Audit)

1. Do NOT Contact CRA Collections First

Speaking to collections without filing returns can trigger aggressive enforcement.

2. Gather All Information Slips

T4, T5, T3, T4A, RRSP slips
Bank statements
Crypto logs
Rental statements
GST/HST filings
If slips are missing, CRA MyAccount usually contains copies.

3. Reconstruct Missing Records

Bank deposits
Platform payouts
Crypto ACB
Rental statements
Business revenue and expenses
Reconstruction must be accurate to withstand CRA scrutiny.

4. File All Late Returns Together

This prevents CRA from:
issuing multiple separate assessments
charging repeated penalties
triggering multiple collections actions

5. Consider the Voluntary Disclosures Program (VDP)

If CRA has NOT contacted you yet, VDP offers:
penalty relief
partial interest relief
protection from prosecution
VDP is essential for:
cash income
crypto omissions
foreign income
unreported business income

6. Apply for Taxpayer Relief for Penalties

If hardship caused non-filing, CRA may cancel:
late-filing penalties
interest
GST/HST penalties
late-payment penalties

7. Set Up a Payment Arrangement

If you owe money, CRA allows:
monthly payments
structured plans
reduced garnishments
A CPA negotiates more reasonable terms than taxpayers can alone.

When You Are Already Contacted by CRA

If you received:
a Notice of Assessment
a Review Letter
a Collections Notice
a Requirement to Pay
a Garnishment Notice
you must file immediately and let a CPA manage communication. Do not attempt to negotiate with CRA without assistance.

Special Considerations for Self-Employed Individuals

Self-employed taxpayers must catch up on:
T2125 business returns
GST/HST filings
CPP payable
Business expenses documentation
Cryptocurrency, platform, and cash earnings
CRA audits self-employed filers aggressively.

Special Considerations for Corporations

Corporations must catch up on:
T2 corporate returns
GST/HST
payroll source deductions
financial statements
late corporate filings may trigger director’s liability.

Mackisen Strategy

At Mackisen CPA Montreal, we help taxpayers safely catch up after years of non-filing by preparing past returns, reconstructing income, applying for VDP or Taxpayer Relief, negotiating with collections, and preventing CRA from issuing inflated arbitrary assessments. Our approach protects clients from penalties, freezes, garnishments, and aggressive audits.

Real Client Experience

A Montreal consultant who hadn’t filed in 6 years resolved all debts with VDP relief. A self-employed tradesman avoided garnishment through rapid catch-up filing. A newcomer fixed missed returns after immigration confusion. A landlord who ignored filings received retroactive benefits after we filed all past years.

Common Questions

Will I go to jail for not filing? Only in extreme fraud cases. Will CRA forgive penalties? Yes—via VDP or Taxpayer Relief. Should I file myself? Risky for multiple years. Will catching up trigger an audit? Not if done properly. Can CRA freeze my bank? Yes—if filings remain outstanding.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps individuals and businesses catch up on unfiled tax years safely, strategically, and with full CRA compliance while minimizing penalties, interest, and audit risk.