Interest and penalties

Interest

If you did not pay your 2009 taxes on time or if there is a balance owing for 2009 on your notice of assessment, we charge compound daily interest starting May 1, 2010, on any unpaid amounts owing for 2009. This includes any balance owing if we reassess your return. In addition, we will charge you interest on any penalties, starting the day after your return is due. The rate of interest we charge can change every three months. See prescribed interest rates.

If you have amounts owing from previous years, we will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

Interest on unpaid taxes may be waived or cancelled under certain circumstances. See Taxpayer relief provisions.

Late-filing penalty

If you owe tax for 2009 and do not file your return for 2009 on time, we will charge you a late-filing penalty. The penalty is 5% of your 2009 balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.

If we charged a late-filing penalty on your return for 2006, 2007, or 2008 your late-filing penalty for 2009 may be 10% of your 2009 balance owing, plus 2% of your 2009 balance owing for each full month that your return is late, to a maximum of 20 months.

If you file your return late because of circumstances beyond your control, we may waive or cancel the late-filing penalty we have charged you. If this happens, complete Form RC4288, Request for Taxpayer Relief, and mail it to us. Only requests relating to tax years ending in any of the 10 calendar years before the year you make the request will be considered. For example, a request made in 2010 must relate to the 2000 or a subsequent tax year to be considered. For more information, see Taxpayer relief provisions program.

Repeated failure to report income penalty

If you fail to report an amount on your return for 2009 and you also failed to report an amount on your return for 2006, 2007 or 2008, you may have to pay a federal and provincial/territorial repeated failure to report income penalty.

The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your return for 2009. However, if you tell us about an amount you failed to report, we may waive these penalties. For more information, see our Voluntary Disclosures Program.

Notes
For residents of Quebec, only the federal penalty will be applied as the provincial tax is assessed by Revenu Quebec.

For non-residents and deemed residents of Canada, the provincial/territorial penalty will be applied only if provincial/territorial tax is payable.

Example
Denis has been a resident of Manitoba all his life. At the time he filed his 2006 return he forgot to report $850 of interest income he received that year. In 2007, CRA reassessed his return to include the unreported income. When Denis filed his 2008 tax return in 2009, he failed to report $1,500 of employment income he earned. Later that year when CRA reassessed his 2008 return to include the unreported employment income, Denis was charged a $300 penalty ($150 federal + $150 provincial) for repeated failure to report income. The penalty was charged because Denis failed to include on his 2008 return income that was required to be reported and one of his tax returns for the three previous years was reassessed for the same reason.

False statements or omissions penalty

You may have to pay a penalty if you, knowingly, or under circumstances amounting to gross negligence, have made a false statement or omission on your 2009 return.

The penalty is equal to the greater of:

• $100; and
• 50% of the understatement of tax or the overstatement of amounts deemed to be paid on account of tax.
  

Forms and publications

• General Income Tax and Benefit Package - Guide, return and schedules
• IC07-1, Taxpayer Relief Provisions

Related topics

• Taxpayer relief provisions
• Voluntary Disclosures Program