Behind on your taxes? How to catch up

Understand what unfiled returns cost

For a personal return filed late with a balance owing, the CRA charges a late-filing penalty of 5% of the balance owing plus 1% for each full month the return is late, up to 12 months. If you were charged a late-filing penalty in a recent prior year and the CRA issued a demand to file, the repeated-failure penalty rises to 10% plus 2% per full month, up to 20 months. Compound daily interest runs on unpaid tax from the day after the due date.

Two things follow from this. Penalties are calculated on the balance owing, so a late return with a refund carries no late-filing penalty, and the sooner you file, the fewer months of penalty and interest accumulate. Waiting until you can pay in full is usually the most expensive choice.

Unfiled returns also stop benefit and credit payments, because the CRA uses each year’s return to calculate them. Catching up often restores payments you were entitled to.

Make an inventory before filing anything

List each year that is unfiled, and for each year note what you already have: slips, receipts, business records and any CRA letters. Sign in to your CRA account, or authorize your accountant to do so, to see which slips the CRA has on file and whether the CRA has already issued an assessment for a year you did not file.

Where the CRA has assessed a year without a return, the amount is often an estimate that ignores your deductions and credits. Filing the actual return replaces the estimate. Where a slip is missing, contact the issuer or use pay stubs and statements to estimate, and document what you did to obtain it.

File the oldest year first when carry-forward amounts, such as losses or unused credits, affect later years. Otherwise, file in whatever order gets complete returns in soonest.

Consider the Voluntary Disclosures Program carefully

The Voluntary Disclosures Program (VDP) lets you correct a filed return or file a return you should have filed and, if the application is accepted, receive relief from penalties, part of the interest and criminal prosecution. It does not reduce the tax itself: the CRA states you will still have to pay the taxes you owe plus partial interest. The application is made on Form RC199.

The CRA changed the program effective October 1, 2025. To be eligible, an application must be submitted before an audit or investigation has been initiated, include all relevant information and documentation for the years involved, involve an error or omission that carries penalties or interest, relate to information at least one year past its filing due date and include payment of the estimated tax or a request for a payment arrangement. Applications involving returns with refunds or no tax owing, or matters already under audit, generally do not qualify.

Under the current rules the CRA distinguishes unprompted applications, made before any CRA contact about the issue, from prompted applications made after a CRA communication such as an education letter, with a higher level of relief for unprompted ones. Relief is discretionary and decided case by case. A confidential pre-disclosure discussion is available if you are unsure whether to apply. Because a VDP application must be complete and is not the right route for every late filer, discuss it with an accountant before submitting anything.

Ask about relief from penalties and interest

Separately from the VDP, the taxpayer relief provisions allow the CRA to cancel or waive penalties and interest when events beyond your control, such as serious illness, a death in the family or a natural disaster, prevented you from meeting your obligations. Requests are made through your CRA account or on Form RC4288 and need a clear explanation with supporting documents.

The CRA notes that processing these requests takes many months, and relief is not guaranteed. File the outstanding returns and start paying first; a relief request is a separate step, not a reason to delay.

Arrange payment and stay current

If you cannot pay the full balance, the CRA offers payment arrangements through your CRA account or by phone. The CRA expects the first payment to activate the arrangement, continued payments on schedule and all future returns filed on time. Benefit payments may be applied to the debt even while you pay.

The pattern that causes most repeat problems is catching up once and then missing the next deadline. Put the filing and payment dates in your calendar, set aside money for tax through the year if you are self-employed and file on time even when you cannot pay in full.