CRA already penalized you for filing late. When does the repeated-failure rate apply?

Being late again is not, by itself, the repeated-failure penalty. On a personal return the ordinary late-filing penalty is 5% of the unpaid tax plus 1% for each full month, up to 12 months. The repeated-failure penalty replaces that only when both of these are true. First, CRA charged you a late-filing penalty in any of the three taxation years before this one. Second, CRA sent a demand to file this particular return. The penalty is then 10% of the unpaid tax plus 2% for each full month the return remains unfiled after that, up to 20 months.

Interest is still separate and still compounds daily at the prescribed rate. A refund year does not attract either penalty. The repeated-failure rate is an owing-tax penalty. People read a reminder letter, assume the 10% version has started, and either freeze or pay the wrong amount. Read for the word “demand” and look at the last three years of notices.

How to check your own file in an hour

You need the notices, not a recollection of being scolded.

• Find every Notice of Assessment for the last four years. Look for a line that charged a late-filing penalty.
• Find the letter for the current missing year. If it demands a return by a date, keep that date.
• If both exist, estimate 10% plus 2% times the full months after the return was due, and stop the estimate at 20 months.
• If only the old penalty exists, and there has been no demand, you are in the 5% world if you file late with a balance.
• If you file before a full extra month passes, you stop the next 2% from attaching. Do not wait for a round calendar date.
• Taxpayer relief can be requested. A history of filing on time after this episode is part of what CRA reads. Relief is not owed to you.

File this one on time even if the older years are ugly

The penalty you are in today is about this return. Tax Everyday will file the demanded year first when the letter says so. A straightforward personal year is $90 plus HST. If the demanded year is a self-employed year and the totals are ready, it is $650 plus HST. Bring the demand and the notices that show the earlier penalty. We will not guess which rate applies.