You haven’t filed. What does catching up cost?
Unfiled tax returns are an absolute bar to a mortgage — not a worse rate, a declined application. Lenders need two years of Notices of Assessment, and a year you never filed has none. Catching up on three years with $6,000 owing each costs about $4,103 in penalty and interest on top of the tax. If you owed nothing, it costs nothing — the penalty is a percentage of the balance, and 5% of zero is zero.
Everyone writing about this is either a mortgage site that never mentions unfiled returns, or an accounting firm that never mentions mortgages. So here is the part that actually decides whether you can buy: what the CRA charges, and how quickly you could be ready to apply.
Year by year
| Tax year | Tax owing | Late-filing penalty | Arrears interest | Total |
|---|
What the CRA actually charges
Two separate charges, triggered by two different things. Filing late triggers the penalty; paying late triggers the interest. You can incur one without the other.
| Charge | Rate | Maximum | Triggered by |
|---|---|---|---|
| Late-filing penalty | 5% + 1%/month | 17% after 12 months | Filing after the deadline |
| Repeat late-filing penalty | 10% + 2%/month | 50% after 20 months | A prior penalty and a formal demand to file |
| Arrears interest | 7% a year | no cap | Paying after the balance was due |
Interest compounds daily and the rate is reset every quarter, so it keeps growing for as long as the balance is outstanding. The penalty stops growing once it hits its cap — which means that after 12 months, waiting longer costs you interest but no further penalty.
When could you actually apply?
Sooner than most people assume, and that is the genuinely good news on this page. In the example above — three outstanding years — filing electronically puts a Notice of Assessment in your hands in about 2 weeks. Filing all three at once does not treble the wait, because the CRA assesses them in parallel.
What it does not fix is a balance still owing. A lender will want the CRA debt resolved or on a documented payment arrangement before it approves the file, so the tax itself — not the penalty — is usually the thing that sets your timeline.
What people get wrong
- “I owe years of penalties.” Only if you owed tax. The penalty is a percentage of the balance owing on the due date. Employees with tax deducted at source frequently owe nothing, and some are owed refunds they never claimed.
- Self-employed: the two deadlines are different. You have until June 15 to file, but the balance was due April 30. Interest runs from May 1 regardless — so “I filed on time” does not mean “I owe no interest”.
- Refunds expire, roughly at ten years. If the CRA owes you money for an old year, waiting is what costs you. This is the one case where doing nothing has a hard deadline.
- Not filing stops your benefits. The GST/HST credit, the Canada Child Benefit and provincial credits are all calculated from a filed return. People who skip filing because they owe nothing routinely give up more in unpaid benefits than they ever feared in penalties.
- The Notice of Assessment is the document, not the return. Your lender does not want a copy of what you filed. It wants what the CRA assessed — which only exists after processing.
- An assumption does not get you around this. Taking over an existing mortgage still means the lender approves you on income and credit. Unfiled returns block that route too.
Need someone to actually do it?
We do not file returns — we work out what things cost. If you want the catch-up handled rather than explained, Penny is a bookkeeping service built for exactly this: years of receipts and unfiled returns, brought current so you have Notices of Assessment to hand a lender.
Email books@oktd.ca →Handoff is a separate service and is not paid on whether you get a mortgage. See what you could afford once you are filed →
Common questions
Can you get a mortgage if you have not filed your taxes?
No, not with a mainstream lender. Lenders qualify a self-employed borrower on the last two years of Notices of Assessment plus the T1 General, and a year you never filed has no Notice of Assessment. It is a declined application rather than a higher rate. Any balance owing to the CRA also has to be resolved before approval.
How much is the penalty for filing taxes late in Canada?
5% of the balance owing on the due date, plus 1% of that balance for each complete month the return is late, to a maximum of 12 months — so 17% at the cap. If the CRA charged you a late-filing penalty in any of the three preceding years and issued a formal demand to file, it doubles to 10% plus 2% per month for up to 20 months, which caps at 50%.
What if I do not owe any tax? Is there still a penalty?
No. The late-filing penalty is a percentage of the balance owing, so if you owed nothing the penalty is 5% of nothing, no matter how many years have passed. Many people who have not filed in years are employees with tax already deducted at source, and some are owed refunds. You still need to file to get the Notices of Assessment a lender asks for.
How many years back can I file taxes in Canada?
You can file any outstanding year. For refunds and adjustments an individual can generally ask the CRA to go back about ten years, so a refund older than that is usually lost for good. That deadline is the real cost of waiting for anyone who does not owe.
How long after filing do I get my Notice of Assessment?
Roughly 2 weeks if you file electronically and closer to 8 on paper. Filing several outstanding years at once does not multiply the wait, because they are assessed in parallel. The Notice — not the filing — is the document your lender needs.
Do self-employed people have a different tax deadline?
Yes, and it catches people out. If you or your spouse are self-employed you have until June 15 to file, but any balance owing is still due April 30. Interest starts running on May 1 even though the late-filing penalty cannot begin until after June 15.
Penalty rates from the Income Tax Act s.162(1) and s.162(2); the arrears interest rate is the CRA’s prescribed rate on overdue amounts, currently 7% and reset quarterly — we apply it flat across all years rather than reconstructing every past quarter, so long-outstanding balances are an estimate rather than an exact figure. Mortgage documentation requirements reflect what mainstream Canadian lenders ask self-employed borrowers for. This is information, not tax or legal advice, and the CRA’s assessment is the binding number.