What penalties can CRA add to a reassessment?

CRA can add several categories of civil penalties to a reassessment, depending on the nature of the error or omission. The most common are:

Late-filing penalties apply when you file your return after the due date and owe tax. The base penalty is 5% of the balance owing, plus 1% per full month the return is late, up to a maximum of 12 months. A second late filing within a three-year period attracts higher rates.

Failure to report income: if you failed to include income in your return and CRA discovers it through an audit, CRA may assess a penalty of 10% of the unreported amount (or 20% if you had a similar failure in the preceding three years).

Gross negligence penalty: when CRA concludes a misstatement was due to gross negligence or was made knowingly, the penalty is 50% of the taxes attributable to the false statement or omission. This is the most serious civil penalty and is often contested through the objection process.

False statement penalties under the Excise Tax Act (for HST matters) follow similar logic. All penalties attract arrears interest from the original due date.