Late GST/HST Filing Penalties: How to Avoid or Request Waivers

GST/HST penalties hit businesses harder than almost any other CRA penalty. Unlike income tax, GST/HST is a trust tax — meaning the money collected belongs to the government, not the business. Because of this, CRA treats GST/HST non-compliance aggressively. Filing returns late, remitting late, or failing to file altogether triggers immediate penalties, daily interest, and often escalates into a full GST/HST audit. Whether you operate a retail shop, restaurant, construction business, e-commerce store, consulting practice, or rental operation, understanding how GST/HST penalties work — and how to request relief — is essential to avoiding serious financial consequences.

Understanding GST/HST Filing Obligations

Businesses must:
file GST/HST returns by the assigned due date (monthly, quarterly, or annually)
remit GST/HST collected from clients
claim Input Tax Credits (ITCs) properly
keep invoices and supporting documentation
Failure to file or remit on time results in penalties and interest that compound daily.

Types of GST/HST Penalties

1. Late Filing Penalty

Applied when the GST/HST return itself is filed late.
Penalty:
1% of the amount owing + 0.25% per month (up to 12 months)

2. Failure to File Penalty

Applied when CRA has to estimate and assess GST/HST because no return was filed.
Highly risky, often leads to audits.

3. Late Remittance Penalty

If GST/HST was filed on time but payment was late.
Interest: daily compounding at CRA’s prescribed rate
Penalty varies depending on lateness.

4. Repeat Failure Penalties

If a business repeatedly misses deadlines, CRA increases penalties and may escalate to enforcement.

5. Gross Negligence Penalties (Extreme Cases)

Up to 50% of tax understated when CRA believes the business intentionally failed to remit.
Common in cash-based industries or businesses using unreported revenue.

Why CRA Is Strict About GST/HST

GST/HST collected from customers is not the business’s money. CRA views late filing or remitting as:
withholding government funds
mismanagement of trust funds
potential tax evasion
This is why penalties, interest, and collection actions are far more severe.

Consequences of Late GST/HST Filing

CRA may:
freeze bank accounts
garnish receivables
deny ITCs
assess multiple years at once
launch a GST/HST audit
issue director’s liability assessments
place liens on business assets
Ignoring late filings triggers aggressive CRA enforcement.

Common Reasons Businesses File GST/HST Late

cash flow problems
bookkeeping backlog
missing invoices
poor accounting systems
ignored CRA mail
business owner illness or hardship
misunderstanding annual vs quarterly filing rules
rapid business growth without accounting support

How to Avoid Late GST/HST Filing Penalties

file returns even when you cannot pay — penalties are lower
pay instalments or partial payments
use accounting software (QuickBooks, Xero, Wave)
keep business and personal accounts separate
file earlier than the deadline
hire a bookkeeper or CPA to manage monthly bookkeeping
avoid last-minute reconciliations
CRA rarely waives penalties when returns are habitually late.

How to Request Penalty or Interest Waivers

The only way to request relief is through Taxpayer Relief (Form RC4288).
CRA may waive penalties and interest when:
serious illness
death in the family
mental health crisis
natural disaster
financial hardship
CRA delays or errors
To succeed, you must:
explain the situation clearly
provide supporting evidence
prove that circumstances were beyond your control
demonstrate compliance once circumstances improved

When CRA Will Not Waive GST/HST Penalties

CRA rarely grants relief for:
cash-flow mismanagement
negligence
ignoring CRA mail
lack of bookkeeping
persistent lateness
Claiming “I forgot” is not acceptable for trust taxes.

How to Fix Multiple Late GST/HST Filings

1. File all missing returns immediately

Even zero-activity returns must be filed.

2. Reconcile GST/HST collected vs ITCs

Ensure accuracy to avoid additional reassessments.

3. Request Taxpayer Relief if justified

4. Consider the Voluntary Disclosures Program (VDP)

If CRA has not contacted you yet, VDP may eliminate penalties entirely.
VDP is critical for:
unreported revenue
incorrect GST returns
missing multiple returns
intentional or repeated errors

What Happens if GST/HST Debt Goes to Collections

CRA Collections can:
freeze your business bank account
send Requirements to Pay to clients
seize receivables
garnish corporate wages
pursue directors personally
Collections does NOT pause during an objection for GST/HST — only tax court or payment negotiations can stop enforcement.

Director’s Liability for GST/HST

Directors can be personally liable for:
unremitted GST/HST
related interest
related penalties
Resignation does not erase liability for past years.

How to Set Up a Payment Arrangement with CRA

You may negotiate:
monthly payments
temporary hardship arrangements
reduced payments if justified
CRA requires full financial disclosure for large debts.

Mackisen Strategy

At Mackisen CPA Montreal, we help businesses avoid and resolve GST/HST penalties by filing missing returns, reconstructing ITC documentation, negotiating with CRA Collections, preparing Taxpayer Relief applications, and using VDP to eliminate penalties for late or incorrect filings. We defend you during GST/HST audits and help implement systems to ensure future compliance.

Real Client Experience

A Montreal contractor avoided $38,000 in penalties after a Taxpayer Relief request. A restaurant owner corrected two years of GST/HST returns and reversed ITC denials. A Shopify seller used VDP to eliminate penalties for unfiled quarterly GST returns. A consultant negotiated a manageable payment plan to stop CRA garnishment.

Common Questions                                    

Can CRA waive GST penalties? Yes — through Taxpayer Relief or VDP. Does filing late cause an audit? Often. Can I file GST late even if I can’t pay? Yes — and you should. Does an objection stop GST collections? No.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses resolve late GST/HST filings, reduce penalties, avoid CRA enforcement, and achieve long-term compliance through expert support and structured planning.