Consequences of Not Filing Your Tax Return: What You Need to Know

Mark Virgil Lofranco • 27 November 2024

Filing your tax return on time in Canada is not only a legal requirement but also essential for maintaining your financial health. Delaying or neglecting to file can result in penalties, interest charges, and, in severe cases, legal consequences. Understanding the impact of late or non-filing helps you manage your responsibilities and avoid unnecessary stress.



Here’s what happens if you don’t file your tax return and how to avoid common pitfalls.

Why Filing Your Tax Return Matters


Filing your tax return on time isn’t just about avoiding penalties—it’s also about ensuring you receive all the benefits and credits you’re entitled to. The Canada Revenue Agency (CRA) issues important benefits, such as the Canada Child Benefit (CCB), the GST/HST credit, and Old Age Security (OAS) payments, based on your tax return. Missing out on these benefits can impact your financial well-being.


Also, a timely tax filing ensures you receive your Notice of Assessment (NOA), a document that confirms your income and eligibility for certain loans, mortgages, or financial services. Without this proof, you may face delays in obtaining financial products, as banks often require your NOA as evidence of income and tax compliance.


Late Filing Penalties and Fees


Filing late triggers an automatic penalty. The CRA charges 5% of the balance you owe, plus 1% for each month your return is late (up to 12 months). If you’ve filed late in previous years, this penalty doubles, charging 10% of the balance and 2% per month for up to 20 months.


Additionally, you may face an extra penalty if you fail to report income over $500 for 2020–2023. This penalty is the lesser of:

  • 10% of the unreported amount, calculated federally and provincially.
  • 50% of the difference between understated tax and actual withholding.


Consequences of Not Paying Taxes


If you don’t pay your taxes by the April 30 deadline, the CRA starts charging compound interest on the owed amount, beginning May 1. Over time, this debt can snowball, especially if interest accrues daily.

The CRA has various ways to collect unpaid taxes, including garnishing wages, seizing bank accounts, or placing liens on property. If unpaid taxes are linked to tax evasion, you could face legal penalties, including fines or imprisonment.

If you can’t pay your taxes in full, the best course of action is to contact the CRA and arrange a payment plan. Doing so can help avoid severe consequences, such as wage garnishments or property liens.


Is Failing to File a Crime?


In some cases, failing to file taxes can be considered tax evasion, a serious criminal offense. Tax evasion involves deliberately avoiding taxes through underreporting income, claiming false deductions, or hiding assets.

If the CRA suspects tax evasion, they can launch an audit or reassess your taxes. Severe cases may result in criminal charges, heavy fines, and imprisonment. Most non-filing cases, however, stem from misunderstandings or financial hardship rather than criminal intent.


TurboTax can provide guidance and resources to help you understand your legal obligations and avoid severe consequences. If you're unsure how to proceed, TurboTax experts can help you navigate the steps to compliance.


Practical Steps to Avoid or Resolve Non-Filing


If you’ve missed the filing deadline or receive a Demand to File letter from the CRA, here’s what you can do:


  1. Contact the CRA: Reach out to the CRA to discuss potential payment plans. Being proactive demonstrates your intent to resolve the issue and can reduce penalties.
  2. Gather Your Documents: Collect tax slips, receipts, and any other financial documents needed to complete your return.
  3. File Your Return: Ensure all information is accurate, and submit your return through NETFILE or by mail.
  4. Track Refunds or Payments: Use CRA My Account to track refunds or make any necessary payments.
  5. Store Your Records: Keep copies of your return and supporting documents for at least six years.


TurboTax Can Help You Get Back on Track


If you’ve missed the April 30 tax deadline, TurboTax can assist you in quickly preparing and submitting a late return. TurboTax’s TurboTax Live offers personalized support from tax experts who can provide advice on negotiating with the CRA and possibly reducing penalties.


Whether you’re an individual taxpayer or self-employed, TurboTax ensures that you don’t miss any critical details, helping you report all income and deductions accurately.


By acting quickly and using the right tools, you can file your return, minimize penalties, and avoid further complications.


Key Takeaways:

  • Filing tax returns is often necessary to prove income for loans, mortgages, and financial services.
  • Immediate action, like contacting the CRA for a payment plan, can reduce penalties.
  • Using tax filing tools, like TurboTax, simplifies the process and avoids mistakes.

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