How a $12,000 CRA penalty grew from one missed GST filing
A real Abbotsford contractor put off filing GST for 14 months. Here is exactly how the penalties and interest stacked up — and how we fixed it.
A drywall contractor came to us last spring with a brown envelope he'd been ignoring for months. He'd collected GST from his clients all year but never filed a return — partly because the bookkeeping was a shoebox of receipts, partly because he assumed 'I'll deal with it at tax time.'
By the time he opened that envelope, the CRA had filed an arbitrary (notional) assessment on his behalf. They estimated what he owed, added late-filing penalties, and started charging compound daily interest. The number at the top of the page was just under $12,000.
How the penalty actually built up
The GST he had genuinely collected was about $7,400 — money that was never his to keep. On top of that sat the late-filing penalty: 1% of the balance owing plus 0.25% per month it stayed unfiled, for up to 12 months.
Then came the interest. The CRA charges compound daily interest on overdue GST at the prescribed rate, and it does not stop until the balance hits zero. Fourteen months of silence turned a manageable remittance into a five-figure problem.
The cruelest part: because the books were a mess, he had never claimed his Input Tax Credits. He'd paid GST on fuel, materials, tools and subcontractors all year — thousands of dollars he was entitled to claim back, sitting unrecorded in that shoebox.
What we did to dig him out
We rebuilt 14 months of books from bank statements and receipts, then filed every overdue return at once. The recovered Input Tax Credits knocked roughly $4,300 off the balance immediately.
Next we filed a Taxpayer Relief request, asking the CRA to cancel part of the penalties and interest. First-time filers with an otherwise clean record often qualify. The CRA waived a meaningful chunk.
Final out-of-pocket cost: a fraction of the original assessment. But the lesson stuck — he's now on quarterly filing with us, and the shoebox is gone.
The takeaway
GST you collect is the government's money held in trust. The CRA treats unfiled GST far more harshly than a late income tax return. If you've fallen behind, the worst move is waiting — penalties and interest only compound. The second-worst is filing without claiming your credits.
If there's an envelope you've been avoiding, send us a photo of it. We've seen worse, and we can usually get the number down.