What Happens If You Ignore a CRA Demand to File Your Taxes

If CRA sends you a Demand to File letter and you ignore it, the penalties can be serious. Here's what that letter means and what you should do next.

What to Do If CRA Demands You to File Your Taxes (and You Haven’t)

Every now and then, someone walks into my office in Ottawa holding a letter from the CRA titled Demand to File a Return. They’re confused because they thought if they didn’t owe taxes, they didn’t need to file. Unfortunately, that’s not how it works.

Once CRA sends you this letter, you’re on the hook, even if you didn’t owe a penny. Section 150(2) of the Income Tax Act gives CRA the legal right to demand a return from you for any year.

What if I don’t respond?

Failing to respond can turn into a criminal offense. Yes, criminal... even if you’re a T4 employee. Saying "my accountant didn't do it" doesn’t hold up in court.

If CRA thinks you owe taxes, here’s what happens:

• First-time penalty: 5% of the unpaid tax, plus 1% per month (up to 12 months)
• Repeat penalty (within 3 years): 10% of the unpaid tax, plus 2% per month (up to 20 months)

How to fix it

If you’re already behind, your best option is the Voluntary Disclosures Program. It lets you clean things up before CRA catches you. Once approved, you can file those missing years and avoid criminal charges or harsher penalties.

Final word

CRA takes non-filers seriously, especially when they've sent a demand letter. If you're in Ottawa and you've received one, or you’ve been off the radar for a while, this is your window to fix it before it becomes a bigger problem.

I've seen this dozens of times... you're not the only one. Get in touch if you need help responding or applying for disclosure.

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This is not legally binding tax advice. This is educational analysis. Say hello if you need help.

hello@taxesmadesimple.ca

WhatsApp - 613.600.4194

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