Haven’t filed your taxes in years?
You are not the first and you are not in as much trouble as you think. Unfiled returns are one of the most common problems an accountant sees, and there is a defined process for fixing them — including a CRA program that can waive the penalties if you come forward before they contact you.
Already had a letter from CRA? Skip to what a notice of collection means →
The short version
What actually happens with unfiled returns.
- Filing late is not a criminal matter — for almost everyone it is a penalty and interest problem
- Penalties are capped, but interest compounds daily and does not stop
- Coming forward first matters — the Voluntary Disclosures Program gives the most relief when you apply before CRA prompts you, and reduced relief afterwards
- You can usually still claim refunds — many late filers are actually owed money
The worst outcome is almost always doing nothing for another year. Interest keeps running and the one program that forgives penalties stops being available the moment CRA writes to you.
What filing late actually costs
Two separate charges apply, and people often confuse them. The penalty is a one-off percentage that stops growing after a set number of months. The interest never stops, compounds daily, and is charged on the tax and on the penalties.
The late-filing penalty
If you owe tax and file after the deadline, CRA charges 5% of the balance owing, plus 1% of that balance for each full month the return is late, to a maximum of 12 months. If you have been charged a late-filing penalty in any of the three previous years and CRA has issued a formal demand to file, the repeat rate is higher — 10% plus 2% per month, up to 20 months.
Work out your penalty and interest with our CRA interest calculator →
Interest is the part that hurts
Interest is charged on unpaid tax from the balance-due date and compounds daily at CRA’s prescribed rate, which is reset every quarter. On a balance left for several years, interest frequently exceeds the original penalty. This is the reason that filing now beats filing when you have the money — filing and paying are two separate obligations.
Penalty rates and the prescribed interest rate are set by CRA and change over time — the figures above reflect the long-standing structure, but confirm the current rate for your situation.
The Voluntary Disclosures Program
CRA runs a program for exactly this situation. The Voluntary Disclosures Program (VDP) can cancel penalties and grant partial interest relief. You still owe the tax — the VDP forgives the punishment, not the debt.
Since 1 October 2025 there are two levels of relief. An unprompted application — made before CRA has contacted you about the issue — receives the fuller relief. A prompted application, made after CRA has been in touch, can still qualify for partial relief. Hearing from CRA does not, by itself, close the door.
An application generally has to meet all of these conditions:
- Not already under audit or investigation for the information being disclosed — this, rather than CRA contact in general, is the disqualifying event. Applying earlier still gets you better relief.
- Complete — all the missing years and all the missing information, not a convenient subset.
- Involves a penalty — there has to be something to forgive.
- At least one year overdue — the program is not for a return that is merely late.
- Includes payment of the estimated tax owing, or a payment arrangement.
What a notice of collection means
A notice of collection is not a bill and not a warning shot. It is CRA telling you that a balance is now in collections and that legal collection action can follow. That can include garnishing wages, issuing a requirement to pay to your bank, or registering a lien.
What to do first
Do not ignore it, and do not pay it blindly either. If returns are unfiled, CRA may have issued an arbitrary assessment — their own estimate of what you owe, made without your deductions, expenses or credits. Arbitrary assessments are routinely far higher than the real number. Filing the actual returns often reduces the balance substantially, sometimes to nothing.
Payment arrangements
If a real balance remains, CRA will generally agree to a payment arrangement based on what you can demonstrably afford. Interest continues to run during the arrangement, but collection action normally stops while you are keeping to it.
How many years can CRA go back?
For most individuals and small businesses, CRA’s normal reassessment period is three years from the date on your notice of assessment. After that a year is generally closed — with an important exception: there is no time limit where there has been misrepresentation attributable to neglect, carelessness or wilful default, or fraud. Unfiled years are not closed at all, because the clock starts at assessment and an unfiled year has never been assessed.
Going back to fix your own returns
The relief runs in both directions. Under the taxpayer relief provisions you can generally ask CRA to adjust a return going back ten calendar years — useful where a deduction or credit was missed. Refunds for older years are not automatic and depend on the request being accepted.
If you have never filed, or it has been many years
Five years, ten years, never at all — the process is the same one, just repeated. People assume a long gap makes their situation hopeless or unusual. It makes it larger, not different, and the steps below are what a multi-year cleanup actually looks like.
You do not need the paperwork you have lost
This is the objection that keeps people stuck, and it is the easiest one to remove. CRA already holds copies of most slips filed under your SIN — T4s, T5s, T3s, T4As, RRSP receipts. With authorisation we can pull those records and rebuild years for which you have nothing in a shoebox. What is genuinely missing is usually self-employment income and expenses, and a reasonable, consistent reconstruction is accepted practice for those.
Oldest year first
Returns are filed in order, earliest to latest, because each year carries forward into the next — losses, unused credits, RRSP room, instalment history. Filing the most recent year on its own because it feels most urgent usually means refiling it later. Doing them in sequence once is faster than doing one of them twice.
One disclosure covers all the years
A Voluntary Disclosures Program submission is made for the whole package, not year by year. That matters for a long gap: the application has to be complete, so the work is done first and submitted together. It also means the deadline that counts is the same for all of it — CRA must not have contacted you first. A long gap does not disqualify you from the programme. Being contacted before you apply does.
Some of those years may owe you money
Long non-filers are often owed refunds rather than facing bills — withheld tax on employment income, GST credits, and the Canada Child Benefit, which requires filed returns to be paid at all. Families who have not filed for several years sometimes recover more in retroactive benefits than they owe in tax. You will not know which side of the line you are on until the years are prepared.
How the cleanup actually works
The process is more ordinary than the anxiety around it suggests. Most multi-year cleanups follow the same path:
- Find out what CRA already has. Slips, assessments and demands are on file and can be pulled — you do not have to remember years you have lost track of.
- Establish which years are genuinely missing, and whether any have been arbitrarily assessed.
- Reconstruct the income and expenses. Bank records generally carry this where receipts are gone.
- Decide on the VDP before filing, because whether you apply changes how the returns go in.
- File the years together, then deal with any remaining balance as one number rather than several.
Talk to someone before you write to CRA
Greg is a tax accountant in Langley and has prepared personal and corporate returns in the Fraser Valley since 2002, including multi-year catch-up filings and voluntary disclosures. A 15-minute call is usually enough to work out how many years are actually outstanding, whether the VDP is worth using, and roughly what the cleanup involves. The fee is agreed in writing before any work starts.
We work with clients in person in Langley and Maple Ridge, and remotely.
Related reading: Personal tax returns · Accountant for self-employed · Corporate tax and T2 filing · Tax deadlines in BC · CRA interest calculator