T2 Late Filing Penalty and CRA Interest Calculator 2026
Find out exactly what a late T2 is costing you today. The 5% base penalty, the 1% per month that keeps adding, the repeat-offender rate of 10% plus 2% per month, and daily compounded arrears interest calculated at the real CRA rate for every quarter your balance has been outstanding.
total owing to the CRA
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Key Dates
| Milestone | Date | Position |
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Penalty Breakdown
| Component | Rate | Amount |
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Arrears Interest by CRA Rate Period
| Period | CRA Rate | Days | Interest Added |
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What Waiting Costs You
| If You File | Penalty | Interest | Total Owing |
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Other Exposure This Situation Creates
What to Do Next
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Disclaimer: This calculator applies subsections 161(1), 162(1) and 162(2) of the Income Tax Act and the CRA prescribed interest rates in force from 2018 onward. Interest is compounded daily on the unpaid tax from the balance-due day. Interest also accrues on the penalty itself from the date of assessment, which is not included here, so a real CRA notice may be slightly higher. Instalment interest, the instalment penalty, provincial penalties in provinces that administer their own corporate tax, and payroll or GST/HST arrears are not included. This page is general information, not tax advice.
What Happens When a T2 Is Filed Late
A Canadian corporation must file its T2 return within six months of its fiscal year end, whether or not it owes any tax and whether or not it carried on business. Miss that date with a balance owing and two separate charges start running at the same time: a late-filing penalty that steps up every month, and arrears interest that compounds daily.
The two are calculated differently and start on different dates, which is why most owners underestimate the total. Interest starts at the balance-due day, two or three months after year end. The penalty starts at the filing due date, six months after year end. By the time an owner realises the return is outstanding, interest has usually been running for several months longer than the penalty.
The Late-Filing Penalty
| Situation | Base Penalty | Monthly Addition | Maximum Months | Worst Case |
|---|---|---|---|---|
| First late filing | 5% of unpaid tax | 1% per complete month | 12 | 17% of unpaid tax |
| Repeat failure to file | 10% of unpaid tax | 2% per complete month | 20 | 50% of unpaid tax |
The repeat rate under subsection 162(2) does not apply simply because you were late before. Two conditions must both be met: the CRA must have issued a formal demand to file the return, and a late-filing penalty must have been assessed for any of the three preceding tax years. If only one applies, the ordinary 5% plus 1% rate stands.
The penalty is a percentage of unpaid tax, not of revenue. If the balance is paid in full by the filing due date and only the return is late, the penalty is nil, because 5% of nothing is nothing. Paying an estimate before the deadline, even when the return is not ready, is the single cheapest thing an owner can do.
Arrears Interest and Why It Is Worse Than It Looks
Arrears interest is charged at the prescribed rate plus four percentage points and compounds daily. It is not deductible for tax purposes, so a corporation paying tax at the Ontario small business rate of 12.2% needs to earn roughly 8% before tax simply to stand still against a 7% CRA charge.
| Period | Rate Charged on Overdue Tax |
|---|---|
| 1 July 2020 to 30 June 2022 | 5% |
| 1 July 2022 to 30 September 2022 | 6% |
| 1 October 2022 to 31 December 2022 | 7% |
| 1 January 2023 to 31 March 2023 | 8% |
| 1 April 2023 to 31 December 2023 | 9% |
| 1 January 2024 to 30 June 2024 | 10% |
| 1 July 2024 to 31 December 2024 | 9% |
| 1 January 2025 to 30 June 2025 | 8% |
| 1 July 2025 to 30 September 2026 | 7% |
The Deadlines That Apply to Every Corporation
| Obligation | Deadline | Consequence of Missing It |
|---|---|---|
| T2 return filing | Six months after fiscal year end | 5% plus 1% per month penalty |
| Balance payment, CCPC claiming the small business deduction | Three months after year end | Daily compounded interest |
| Balance payment, all other corporations | Two months after year end | Daily compounded interest |
| Monthly or quarterly instalments | End of each period | Instalment interest and a possible instalment penalty |
| Ontario annual return | Six months after year end | Corporation can be dissolved for non-filing |
| Filing after a formal demand | The date stated in the demand | $25 per day, minimum $100, maximum $2,500 |
Nil Returns Still Have to Be Filed
A dormant corporation with no revenue and no tax owing still has to file a T2 every year. The late-filing penalty will be nil because there is no unpaid tax, but the CRA can still issue a demand to file, and failing to comply with that demand carries its own penalty of $25 per day to a maximum of $2,500. More practically, a chain of unfiled nil returns is what triggers the demand letters that create the repeat-offender exposure on the year when tax finally is owing.
Voluntary Disclosures and Taxpayer Relief
Two separate programmes can reduce what is owed, and the difference between them matters.
| Programme | What It Can Cancel | Key Condition |
|---|---|---|
| Voluntary Disclosures Program | Penalties and part of the interest | Must be filed before the CRA contacts you about the issue |
| Taxpayer relief | Penalties and interest, at the CRA’s discretion | Circumstances beyond your control, within the last ten years |
A demand to file usually closes the voluntary disclosure door. Once the CRA has written to you about the specific return, the disclosure is no longer voluntary and relief has to be sought on taxpayer relief grounds instead, which is discretionary and far less certain. If no demand has been issued yet, moving quickly is worth real money.
Director Liability
Corporate income tax itself is not a director liability, but unremitted payroll source deductions and net GST/HST are. A corporation that stopped filing T2 returns has very often stopped filing those as well, and a director can be assessed personally for those amounts plus penalties and interest. Resigning does not remove exposure for amounts that arose while in office, and the CRA has two years from the date of resignation to assess.
What This Calculator Does Not Include
- Interest on the penalty itself: the CRA charges interest on an assessed penalty from the date of assessment
- Instalment interest and the instalment penalty: charged separately where instalments were required and missed
- Payroll and GST/HST arrears: these carry their own penalties and are usually the larger problem
- Provincial penalties: in Alberta and Quebec, which administer their own corporate tax
- Gross negligence and false statement penalties: assessed separately where they apply
- Payments already made: enter the balance still outstanding rather than the original assessment
Catching up is cheaper than waiting. The penalty stops growing once the return is filed, even if the tax cannot be paid immediately. Filing and paying are two separate obligations, and filing first stops the 1% monthly clock. Our catch-up corporate tax filing service handles multiple years on a flat fee, including the relief request where one is available.
Frequently Asked Questions
Common questions from owners who have missed the T2 deadline.
Related Calculators and Guides
More tools for corporations dealing with the CRA.
Stop the Clock Before the Next Monthly Tick
The penalty stops growing the day the return is filed. Send us the year ends you are missing and we will tell you the fixed fee to bring every one of them current, prepare the filings, and apply for relief where the facts support it.