CRA Demand to File Penalty Calculator
A demand letter is not a reminder. It carries its own penalty, and it unlocks a repeated failure penalty that roughly triples the cost on the next round. Work out your compliance date, what is accruing now, and what ninety more days adds.
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What Is Accruing
| Item | Basis | Amount |
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The Two Penalty Rates
| Penalty | Rate | Ceiling | On Your Figures |
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What Happens If You Do Nothing
| Stage | Consequence |
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Points That Decide This
What to Do Next
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Disclaimer: Subsection 150(2) allows the Minister to demand a return. Failure to comply with a demand attracts a penalty under subsection 162(7) of the greater of $100 and $25 for each day of default, to a maximum of one hundred days or $2,500. The ordinary late filing penalty under subsection 162(1) is 5% of the unpaid tax plus 1% per complete month to a maximum of twelve. Where a demand has been served and a late filing penalty was assessed in any of the three preceding tax years, subsection 162(2) applies instead at 10% plus 2% per month to a maximum of twenty months. Interest runs at the prescribed rate plus 4%, compounded daily, from the balance due date. Persistent failure to comply with a demand is an offence under section 238, punishable by a fine of between $1,000 and $25,000 and up to twelve months imprisonment. The calculator applies the same estimated tax to each year, which is an approximation. This page is general information, not tax advice.
A Demand Unlocks the Penalty That Triples the Cost
The direct penalty for ignoring a demand is small. What matters is that a demand is one of the two conditions for the repeated failure penalty under subsection 162(2), which replaces 5% plus 1% a month with 10% plus 2% a month.
| Penalty | Rate | Ceiling |
|---|---|---|
| Ordinary late filing, subsection 162(1) | 5% plus 1% per month | 17% of the unpaid tax |
| Repeated failure, subsection 162(2) | 10% plus 2% per month | 50% of the unpaid tax |
On four unfiled years at $45,000 of tax each, that is $30,600 against $84,600. The demand itself carries only $2,500 at most. The real cost is that receiving one and being penalised puts the next round of unfiled years into the higher bracket automatically.
The Direct Penalty Is Capped Quickly
Failing to comply with a demand costs the greater of $100 and $25 a day, to a maximum of one hundred days. So it reaches its $2,500 ceiling a little over three months after the compliance date and stops growing.
That is worth knowing so you focus on the right number. A corporation four months past its demand date has already taken the full demand penalty, and everything still growing is the filing penalty and the interest.
Interest Is the Larger Number
On four unfiled years, the interest is roughly $41,000 against a filing penalty of $30,600. The penalty stops after twelve months, or twenty on a repeated failure. Interest never stops and compounds daily.
| Component | Four Years at $45,000 of Tax |
|---|---|
| Tax | $180,000 |
| Late filing penalty | $30,600 |
| Demand penalty | $1,400 |
| Interest | $41,291 |
| Total | $253,291 |
Ignoring It Escalates in Stages
- The demand penalty starts at the compliance date and caps at $2,500 after a hundred days.
- An arbitrary assessment follows, where the CRA estimates your income under subsection 152(7) with no record of your expenses, producing a figure far above the real liability.
- Collection begins on the assessed amount, including bank garnishment and liens, without a court order.
- Prosecution becomes possible under section 238, with a fine between $1,000 and $25,000 and up to twelve months imprisonment.
- The next round is worse, because a penalty assessed now puts future unfiled years into the repeated failure bracket.
Persistent non-compliance with a demand is where the CRA moves from administration to prosecution. It is the clearest signal available that a file has stopped being routine, and it is the point at which responding matters more than responding perfectly.
You Can Respond Before You Can File
Contacting the CRA before the compliance date to explain the position and propose a timetable is usually accepted, particularly where the records need rebuilding. It does not stop the penalties, but it stops the escalation.
What does not work is silence. An unanswered demand is treated as refusal, and the arbitrary assessment that follows is far harder to unwind than a delay that was flagged in advance.
Voluntary Disclosure Is Gone
Once a demand has been issued, an application under the Voluntary Disclosures Programme is at best treated as prompted, which cuts the interest relief from 75% to 25%, and where enforcement has commenced it is not available at all.
That is a direct cost of having waited. A corporation that came forward before the letter arrived would have had the penalties removed entirely.
What to Do This Week
- Diarise the compliance date from the letter and treat it as real.
- Call the CRA before it passes if the returns cannot be ready, and propose a specific timetable.
- File the oldest year first, because refunds expire three years after the year end and SR&ED at eighteen months.
- Check whether other filings are outstanding, since HST and payroll usually accompany this and payroll carries personal liability.
- Estimate and pay something against the balance, because interest runs on the unpaid amount.
- Fix the filing calendar, since the repeated failure penalty makes a second round considerably more expensive.
Responding imperfectly beats not responding. The escalation from demand to arbitrary assessment to prosecution is driven by silence rather than by the amount owing. Our unfiled returns service covers the response, the filings and the payment arrangement.
Frequently Asked Questions
Common questions on CRA demand letters.
Related Calculators and Guides
More tools for corporations behind on filings.
Responding Imperfectly Beats Not Responding
Send us the demand letter and whatever records exist. We will respond before the compliance date, propose a workable timetable, and file every demanded year oldest first.