For small business owners in Calgary, receiving a CRA Late Filing Notice can feel like a minor issue at first. Maybe you just missed the deadline by a few days, or you were waiting on some paperwork. But ignoring that letter can lead to serious financial and legal consequences—ones that get worse the longer you wait.
The Canada Revenue Agency (CRA) doesn’t let late filings slide. From mounting penalties to frozen bank accounts, here’s what happens after a late filing notice and, more importantly, how to fix it before it spirals out of control.
Penalties Start Immediately—and They Stack Up Fast
If you owe taxes and don’t file on time, the CRA applies an automatic late-filing penalty:
- 5% of the balance owing as an initial penalty.
- An extra 1% per month for up to 12 months.
- Harsher penalties (10% + 2% per month for 20 months) if you’ve filed late in previous years.
The CRA doesn’t care why you missed the deadline—once the penalty kicks in, it won’t be reversed unless you apply for relief (and even then, approval isn’t guaranteed). The best move? File your return as soon as possible, even if you can’t pay in full.
Interest Charges Keep Growing Every Day
On top of penalties, the CRA adds compound daily interest on unpaid taxes and penalties. This means that your tax debt increases every single day that you delay filing or payment.
- Interest starts the day after your filing deadline.
- It applies to both the tax you owe and any penalties charged.
- The CRA adjusts interest rates every three months—if rates go up, so does your debt.
If you’re struggling with cash flow, partial payments can help reduce interest charges. Even if you can’t pay the full amount, paying something is better than nothing.
Unfiled Taxes Can Block Refunds and Tax Credits
Think you don’t need to rush because you expect a refund? Not filing can actually delay or cancel tax benefits your business might be eligible for.
The CRA won’t process refunds or credits until all outstanding returns are filed. This means you could lose access to:
- GST/HST refunds
- The Small Business Deduction
- Other business tax credits and benefits
Even if you don’t owe taxes, you should file as soon as possible to avoid unnecessary delays in getting money back from the CRA.
The CRA Can Freeze Your Bank Account or Garnish Payments
Ignoring a late filing notice doesn’t just lead to penalties—it can trigger serious collection actions. If the CRA thinks you’re avoiding your tax obligations, they have the legal right to:
- Freeze your business bank account without warning.
- Garnish payments from clients (forcing them to send money directly to the CRA).
- Seize assets if tax debts remain unpaid for too long.
At this stage, the CRA isn’t just sending letters—they’re taking direct action against your business. If you receive a Final Notice Before Legal Action, don’t wait—speak with a tax professional immediately to work out a solution.
Your Business Credit Score Could Take a Hit
Most people don’t realize that unpaid taxes can affect your business credit rating. The CRA reports tax debts to credit bureaus, which can:
- Make it harder to secure business loans or lines of credit.
- Damage relationships with suppliers and vendors.
- Hurt your chances of leasing commercial space or getting better financing terms.
Your business reputation is on the line, and unpaid tax debts can impact opportunities for future growth. If you’ve already received a CRA notice, it’s best to deal with it before it affects your financial standing.
How to Fix a CRA Late Filing Notice Before It Gets Worse
If you’ve missed a tax deadline, the most important thing to do is take action now. The sooner you respond, the fewer penalties and interest you’ll face.
Here’s what to do next:
- File your return immediately – Even if you can’t pay in full, filing stops further penalties.
- Review your tax records – Double-check for any missing paperwork before submission.
- Make a payment (even a partial one) – Paying something reduces interest costs.
- Contact the CRA – If you owe more than you can afford, set up a payment plan.
- Apply for Taxpayer Relief – In some cases, the CRA may waive penalties or interest due to hardship.
If you’re unsure how to proceed, getting professional help can make a huge difference. A tax expert can negotiate with the CRA, help set up a payment plan, or apply for relief options that you may not be aware of.
Key Takeaways
- Penalties and interest charges start immediately after missing a tax deadline.
- Unfiled returns can block refunds and business tax credits like GST/HST refunds.
- The CRA has the power to freeze your bank account and seize assets if debts remain unpaid.
- Your business credit score can suffer, making it harder to secure financing.
- Filing as soon as possible is the best way to minimize damage—even if you can’t pay in full.
If you’ve received a CRA Late Filing Notice, don’t wait for the problem to get worse. Contact us today—we’ll help you file, reduce penalties, and get back in good standing with the CRA.
