https://www.canada.ca/en/revenue-agency/corporate/contact-information.html

Failing to file tax returns on time is one of the most serious compliance issues with the Canada Revenue Agency and Revenu Québec.
Many taxpayers mistakenly believe that if they cannot pay, it’s better not to file.
In reality, missing returns create the fastest path to:
• late-filing penalties
• repeated failure penalties
• gross negligence penalties
• estimated assessments
• bank account freezes
• wage garnishments
• seized refunds
• GST/QST account suspensions
• payroll trust fund enforcement
• CRA monitoring flags
• criminal non-filer investigations in extreme cases

This guide explains why CRA penalizes late filing so aggressively, how penalties are calculated, and how Mackisen fixes non-filing issues and stops enforcement.

Legal and Regulatory Framework

Failure-to-file penalties come from the Income Tax Act, Excise Tax Act, and Quebec Taxation Act.
CRA may penalize taxpayers when:
• returns are not filed by the due date
• GST/QST returns are late
• payroll filings are missing
• T4, T5, or NR4 slips are not issued
• corporations miss year-end filings
• repeated late filing occurs
• CRA issues a Requirement to File order

CRA can also estimate your income and assess tax based on assumptions.

Key Court Decisions

Courts consistently uphold CRA’s authority to impose failure-to-file penalties. They have ruled that:
• filing a late return is grounds for automatic penalties
• inability to pay is not a valid excuse
• CRA can estimate income when returns are missing
• repeated late filing justifies severe penalties
• gross negligence penalties apply for multi-year non-filers
• lifestyle and bank-deposit analysis can justify assumptions
• burden of proof rests on the taxpayer, not CRA
• CRA is not obligated to warn taxpayers before assessing penalties

Courts view filing as a basic legal obligation.

Why CRA Penalizes Late Filing

CRA imposes penalties because late returns hinder tax administration and signal potential risk.
High-risk indicators include:
• self-employed taxpayers
• rental or investment income
• small corporations with missing T2 filings
• GST/QST registrants with missing periods
• payroll remittances not filed
• prior audit history
• bank deposits exceeding reported income
• real estate transactions without filings
• repeated late filings

Quebec’s Revenu Québec aggressively penalizes missing GST/QST returns and corporate filings.

How CRA Applies Failure-to-File Penalties (Deep Expansion)

1. Late Filing Penalty

For individuals and corporations:
Penalty = 5 percent of the balance owing + 1 percent per month (up to 12 months)

2. Repeated Late Filing Penalty

Penalty increases to:
• 10 percent of the balance owing
• plus 2 percent per month (up to 20 months)

This applies when:
• late filing occurs within three previous years
• CRA issued a late-filing warning
• a return was filed due to a Requirement to File order

3. Gross Negligence Penalty

CRA may add a 50 percent penalty when:
• multiple years remain unfiled
• income was understated repeatedly
• no books or records were kept
• CRA used bank deposit or net-worth analysis
• CRA believes non-filing was intentional or reckless

4. Estimated Assessments

When you fail to file, CRA may estimate:
• income
• GST/QST owed
• payroll deductions
• taxable benefits
• net-worth increases
• bank deposit amounts

Estimated assessments become legally binding and immediately collectible.

5. GST/QST Non-Filing Penalties

Revenu Québec applies:
• late filing penalties
• trust fund penalties
• suspended refunds
• cancellation of GST/QST accounts
• input tax credit denial

GST/QST non-filing is one of the fastest routes to enforcement.

6. Enforcement Actions

Once assessed, CRA may:
• freeze bank accounts
• garnish wages
• seize tax refunds
• register liens
• seize GST/QST refunds
• issue Requirements to Pay to clients
• escalate to criminal investigation in severe non-filer cases

Late filing quickly becomes a collections problem.

Immediate Financial Risks

Failure-to-file issues lead to:
• large penalties and interest
• inflated assessments
• GST/QST refund holds
• missed deductions
• enforcement pressure
• personal and corporate bankruptcy risk
• director liability for trust amounts
• income tax and GST/QST audits
• long-term compliance monitoring

The financial damage compounds rapidly.

Mackisen Strategy

Fixing non-filing issues requires immediate and structured intervention. Mackisen uses a specialized non-filer recovery model.

Step 1 — Identify All Missing Returns

We review:
• personal returns
• corporate T2 returns
• GST/QST filings
• payroll remittances
• T4/T5 slips
• real estate transaction filings
• investment summaries

This creates a complete compliance map.

Step 2 — Reconstruct Income and Expenses

We use:
• bank statements
• credit card transactions
• POS records
• e-transfer history
• loan documents
• payroll records
• supplier statements
• business ledgers

This replaces missing records with proper documentation.

Step 3 — Prepare All Missing Filings

We fast-track:
• T1 personal returns
• T2 corporate returns
• GST/QST filings
• payroll remittances
• T4/T5 slips

Filing minimizes penalties and recalculates tax accurately.

Step 4 — Correct CRA Estimated Assessments

We reduce assessments by correcting:
• income
• expenses
• GST/QST ITCs
• payroll amounts
• allowable deductions
• non-taxable funds

This often cuts CRA balances significantly.

Step 5 — Penalty Relief Applications

We prepare Taxpayer Relief Requests when:
• hardship occurred
• medical events happened
• disasters impacted filing
• reliance on accountant/bookkeeper failed
• genuine mistakes were made
• CRA delays contributed

CRA may reduce or cancel penalties.

Step 6 — Stop CRA Enforcement

We negotiate:
• freeze removal
• garnishment pauses
• refund release
• payment schedules
• compliance agreements

This stabilizes the client immediately.

Step 7 — Long-Term Compliance Restoration

We implement:
• year-round bookkeeping
• GST/QST monitoring
• payroll controls
• CRA correspondence management
• instalment planning

This prevents future late-filing penalties.

Real Client Experience

A Montreal consultant failed to file for four years. CRA issued estimated assessments totaling $87,000 plus late-filing penalties. Mackisen reconstructed all income, filed accurate returns, reduced tax to $9,500, and obtained full penalty relief.

Another client, a real estate investor, missed GST/QST filings for two years. Revenu Québec suspended refunds and placed the account under enforcement. Mackisen filed all missing periods and restored GST/QST account compliance.

Common Questions

• Will CRA penalize me even if I cannot pay? Yes.
• Can estimated assessments be reversed? Yes, with filed returns.
• Can CRA freeze my account for missing returns? Yes.
• Can gross negligence penalties apply? Yes, for repeated non-filing.
• Does filing stop penalties? Filing stops late penalties but not interest.
• Can CRA prosecute non-filers? In extreme cases.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.