- Late-filing penalties and daily compounding interest can grow quickly on a deceased person's unfiled returns.
- An executor who distributes property without a clearance certificate can be personally liable for unpaid amounts, up to the value distributed.
- Whether any penalty or interest can be reduced depends on the facts, so it is worth confirming with a lawyer or accountant before you rely on it.
You have taken on an estate and found that the person who died left tax returns unfiled, or filed late. Now there are penalties and interest on top of the tax, and you are wondering whether you can simply ask CRA to waive them.
Whether relief is available depends on the facts of the particular late return and the reasons it was late. This article sets out what penalties and interest generally look like, why they matter to you personally as executor, and what practical steps keep the estate moving while you sort it out.
This article covers Canadian federal tax law, which applies in every province.
What a request for relief can and cannot do
Executors often ask whether CRA will cancel penalties and interest because the deceased was ill, died, or left poor records. Whether a reduction is possible depends on the circumstances, the years involved and the reasons for the delay. No one can promise an outcome, and how a request would apply to your situation is worth confirming with a lawyer or accountant. In the meantime, interest compounds daily on the balance and the penalty.
Before you spend time on a request, it helps to know exactly what is owing and for which years. A lawyer or accountant can look at your facts and tell you whether a relief request is realistic and how to present it.
The penalties and interest you may be looking at
Penalties depend on whether a balance is owing and which return is late. Interest is charged in addition.
| Item | How it works |
|---|---|
| Late-filing penalty on a return with a balance owing | 5% of the balance plus 1% for each full month late, up to 12 months |
| Repeat late filing | The penalty may be higher if a late-filing penalty was assessed on the deceased's return for any of the 3 previous years |
| Late T3 return | A separate penalty of $25 per day, minimum $100 and maximum $2,500, even with no balance owing |
| Interest | Compounds daily on the balance and the penalty |
Because interest compounds daily, delay makes the total larger even if the penalty itself has stopped growing.
Check which returns are actually late
Start by confirming which due dates applied. For the final return, a death from January 1 to October 31 means filing and paying by April 30 of the following year, and a death from November 1 to December 31 means six months after the date of death. If the deceased or a surviving spouse or common-law partner carried on a business, the filing date may be June 15 of the following year for deaths January 1 to December 15, though the payment date does not change.
Returns for earlier years generally keep their original due dates, so earlier unfiled years are already late. One exception applies if the person died early in 2026 on or before the 2025 T1 due date without having filed it: that return is due six months after the date of death. A Return for Rights or Things has its own timing, and payment is due by the final return due date.
Why this matters to you personally
A legal representative who distributes property without a clearance certificate is personally liable for the unpaid amounts, limited to the value of the property distributed. CRA says that liability applies whether the assessment comes before or after the distribution, and interest accrues.
CRA does not issue the certificate unless the required returns are filed and assessed and all amounts are paid or secured. It is also generally not issued if the estate cannot cover all tax, interest and penalties owing. So unresolved penalties are not just a nuisance: they can hold up the certificate and, with it, safe distributions to beneficiaries.
What to do next
- Confirm you are recognized as legal representative so CRA will deal with you.
- List every return that is unfiled or late, with its due date.
- File the missing returns promptly, since interest compounds daily.
- Ask CRA what is owing and whether any amount can be secured rather than paid immediately.
- Find out whether deferred tax can be paid in up to 10 equal annual instalments with acceptable security.
- Do not distribute property until you have a clearance certificate, unless enough property will remain to cover any liability.
- Speak with a lawyer or accountant about whether a relief request fits your facts.
Keep copies of everything you send and receive. Notes on why returns were late, such as illness or missing records, are worth gathering early if you intend to raise them with CRA.
Frequently asked questions
Will CRA cancel penalties because the person died?
Returns for earlier years keep their original due dates, so earlier unfiled years are already late at the time of death, and penalties and interest can apply to them. Whether any reduction is possible depends on the facts and the years involved, so it is worth confirming with a lawyer or accountant.
Do I still need a clearance certificate if I request relief?
Yes, if you will distribute property. A representative must obtain the certificate before distributing, or be personally liable for unpaid amounts up to the value distributed.
Can I distribute some of the estate while the penalties are unresolved?
A certificate is not needed before each distribution if enough property remains to cover any liability. How much that is depends on the facts, so confirm the amount with a lawyer or accountant.
Is there a penalty for filing a late T3 even if nothing is owing?
Yes. A late T3 return may attract a penalty of $25 per day, with a minimum of $100 and a maximum of $2,500, even with no balance owing.
Sources
- Income Tax Act s. 159 — Justice Laws (federal)
- CRA – IC82-6R13 Clearance Certificate — canada.ca
- CRA – Apply for a clearance certificate — canada.ca
- CRA – Represent someone who died — canada.ca
- CRA – Filing and payment due dates — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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