It's May 4. The April 30 deadline has come and gone. If you haven't filed your 2025 return — and you owe money — the clock started ticking on May 1.

Here's what's happening to your balance right now, and what you can do about it.

The penalty started on May 1

If you owe taxes for 2025 and haven't filed, the CRA has already applied a 5% penalty on your entire balance owing. That happened automatically on May 1.

From here, an additional 1% is added for every full month your return stays unfiled, up to 12 months. So if you file in June, you're looking at 6% total. In July, 7%. The clock stops the day the CRA receives your return — not the day you start filling it out.

A concrete example: if you owe $3,000 and file three months late, your penalty is $240 (5% + three months × 1%). On top of that, the CRA charges 7% compound daily interest on your unpaid balance, starting from May 1. That's the prescribed rate for Q2 2026, set by the CRA based on Government of Canada Treasury Bill yields. It compounds every single day — meaning the interest accrues on your balance and on the interest already owed.

The math gets uncomfortable fast. File now, even if you can't pay the full amount.

If you've been late before, the numbers double

First-time late filers face the 5% + 1%/month structure above. If the CRA charged you a late-filing penalty in any of 2022, 2023, or 2024 and issued a formal Demand to File, the penalty jumps to:

• 10% of your balance owing immediately
• 2% per month for up to 20 months

For a sole proprietor with a $20,000 tax bill, filing six months late under the repeat-offender rules could result in a penalty of $4,400 before a single dollar of interest is calculated. If this is your situation, don't wait — the monthly additions hit on the first day of each new full month.

If you're getting a refund, stop worrying

The late-filing penalty is calculated as a percentage of your balance owing. If your balance owing is $0 — because you're getting a refund or owe nothing — the penalty is also $0.

The CRA won't penalize you for filing late if they owe you money. But they also won't send your refund until they process your return. File as soon as possible to get what's yours.

You're self-employed? More time to file — but not to pay

If you or your spouse earned self-employment income in 2025, your filing deadline is June 15, 2026 — no late-filing penalty if you file by then. But here's the catch that catches a lot of people every year: your payment was still due April 30.

If you owe $5,000 and you pay it on June 1, you won't face the late-filing penalty — but you will face 31 days of 7% compound daily interest on the unpaid balance. That's roughly $30. Not catastrophic, but not nothing.

The fix: pay an estimate of what you owe now, even if you haven't finished filing yet. Overpaying slightly is fine — the CRA will refund the difference once your return is processed.

Two ways to get relief

Taxpayer Relief (Form RC4288)

If you missed the deadline because of something genuinely outside your control — a serious illness, a death in the family, a natural disaster, or documented financial hardship — you can apply for penalty and interest relief using Form RC4288. The CRA reviews each request individually. Approval isn't guaranteed, but it's worth submitting if you have a real reason.

Voluntary Disclosures Program (VDP)

If you're behind on multiple years of filing — not just 2025 — the VDP lets you come forward before the CRA finds you. Under 2026 rules, if your application is unprompted (the CRA hasn't contacted you yet), you can receive up to 75% relief on interest and full relief on late-filing penalties. If the CRA contacts you first, that relief drops to 25%. No penalties, no prosecution if accepted. You still owe the original tax — but the VDP limits the damage significantly.

What about your CGEB and other benefits?

Filing late doesn't just cost you in penalties. The CRA uses your filed tax return to calculate your Canada Groceries and Essentials Benefit (CGEB) — which replaces the GST/HST credit and issues a one-time payment on June 5, 2026. If you haven't filed by the time payments are processed, you could miss the June 5 top-up entirely, or have it delayed.

Other benefits tied to your filed return include the Canada Child Benefit, provincial credits like the Ontario Trillium Benefit, and GST/HST-linked provincial programs. Filing now — even without paying the full amount — protects all of these.

What to actually do today

1. File your return using NETFILE or tax software, even if you can't pay yet. Filing stops the monthly penalty additions.
2. Pay whatever you can to reduce the interest base. Even a partial payment helps.
3. Set up a CRA payment arrangement if you can't pay the full balance — call 1-888-863-8657 or log into CRA My Account.
4. Submit Form RC4288 if you have documented grounds for relief.
5. Consider the VDP if you're behind on more than one year.

The penalty for filing late is real, but it's fixable. The penalty for doing nothing keeps compounding every day.

Sources

• CRA — Interest and the late-filing penalty
• CRA — Voluntary Disclosures Program