Understanding Your Business Structure
This is the biggest source of deadline confusion! Your penalty situation depends entirely on how your business is legally set up.
| Your Business Type | What to File | Filing Deadline | Payment Deadline |
| Sole Proprietor | T1 Personal Return | June 15th | April 30th |
| Corporation | T2 Corporate Return | 6 months after your year-end | 2-3 months after your year-end |
Sole Proprietor Warning: The April 30th Catch
The CRA gives sole proprietors until June 15th to file your paperwork, but that’s a small gift with a big catch.
- Payment is due April 30th. If you owe tax, the CRA starts charging daily compound interest from May 1st. You are penalized for being late on payment, even if you are on time for filing!
- The Late-Filing Penalty (5% + 1% per month) only kicks in if you file after June 15th AND have an amount owing.
Your Best Strategy: File the return by June 15th to avoid the late-filing penalty, but pay your best estimate of the tax owed by April 30th to stop the compounding interest clock.
Late HST/GST Remittances (Sales Tax)
Whether you collect GST (General Sales Tax) or HST (Harmonized Sales Tax), this money is not yours—it belongs to the government. Using it to cover other business expenses is risky, and the CRA takes it very seriously.
| If you owe GST/HST and remit late… | The penalties are calculated using a specific formula: |
| Late-Filing Penalty | A penalty that starts at 1% of the amount you owe, which then grows slightly for every month you are late (up to 12 months). |
| Daily Interest | The CRA charges daily compound interest on the overdue amount from the day after the deadline. |
The Bottom Line: These charges add up fast. For annual filers (which includes many small sole proprietors), remember that your HST payment is usually due on April 30th, even if you have an extended filing deadline for the paperwork!
Late Payroll Source Deductions (The Red Flag)
This is the most critical deadline of all. As an employer, the money you deduct from your employees’ paycheques (income tax, CPP, EI) is considered “money held in trust” for the Crown. Being late here is a major violation.
| How Late You Are | The Penalty on the Amount Due is… |
| 1 to 3 days late | 3% |
| 4 to 5 days late | 5% |
| 6 to 7 days late | 7% |
| More than 7 days late | 10% |
A Terrifying Thought: If you fail to remit knowingly or repeatedly in the same year, the penalty can jump to 20%. This can instantly drain your bank account.
The Unseen Damage: Beyond the Math
The numbers above are scary enough, but there are other consequences that hurt your business health:
- Personal Liability: For corporate debts like GST/HST and payroll, the CRA can pursue the directors or owners personally to recover the funds. This is a massive risk.
- Audit Magnet: A pattern of late filings or payments puts your business on the CRA’s radar, making you far more likely to face a time-consuming and expensive audit.
- Collection Power: If the debt is significant, the CRA has the power to take aggressive collection actions—like issuing demands to your clients to send their payments directly to the government instead of to you (called a Requirement to Pay).
You Are Late. Now What?
If you are already behind, stop panicking and start acting. The worst thing you can do is wait another day.
- File Immediately (Even If You Can’t Pay): Filing the return stops the late-filing penalties from growing. This is your number one priority.
- Pay What You Can: Any dollar you pay today is one less dollar accruing daily compound interest tomorrow. Make a partial payment if a full payment isn’t possible.
- Call in the Experts: Contact your accountant or bookkeeper immediately. They can accurately calculate your real liability and penalties.
- Talk to the CRA: If you owe a lot, the CRA offers payment arrangement plans. Contacting them to set up a plan shows good faith and often prevents them from escalating to aggressive collection actions.
- Look into Taxpayer Relief: If your lateness was due to factors truly beyond your control (serious illness, natural disaster), your accountant can help you apply to the Taxpayer Relief Program to request a cancellation or waiver of interest and penalties.
Bottom line: Don’t let fear paralyze you. Take control of your tax situation today to protect your business’s future.
