Penalties and interest

Penalties

If you do not file the trust's T3 return by the due date, we will charge a late-filing penalty. The penalty is 5% of the unpaid tax plus 1% of the unpaid tax for each full month that the return is late, to a maximum of 12 months. The trust may still be subject to a penalty even if all income has been allocated and there are no taxes owing. The penalty is $25 a day for each day the return is late, from a minimum of $100 to a maximum of $2,500.

The late-filing penalty will be higher if we issued a demand to file the return, and we assessed a late-filing penalty for any of the three previous years' returns. In this case, the penalty may be 10% of the balance owing, plus 2% of the 2016 balance owing for each full month that the return is late, to a maximum of 20 months.

If you distribute any trust-related information slip to a recipient late, the penalty is $25 a day for each day the slip is late, from a minimum of $100 to a maximum of $2,500, for each failure to comply with this requirement.

If you are convicted of not filing a return or slip as required, you are liable to a fine of $1,000 to $25,000, or to a fine and imprisonment for a period of up to 12 months.

The minimum penalty for failing to file a trust-related information slip by the due date is $100 and the maximum penalty is $7,500. For more information, go to Penalty for failure to file an information return by the due date.

Repeated failure to report income penalty

If you failed to report an amount on your return for 2016 and you also failed to report an amount on your return for 2013, 2014, or 2015, you may have to pay a federal and provincial or territorial repeated failure to report income penalty. If you did not report an amount of income of $500 or more for a tax year, it will be considered a failure to report income.

As the result of the proposed changes, the federal and provincial or territorial penalties are each equal to the lesser of:

• 10% of the amount you failed to report on your return for 2016; and
• 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.

However, if you voluntarily tell us about an amount you failed to report, we may waive these penalties. For more information, go to Voluntary Disclosures Program.

False statements or omissions penalty

You may have to pay a penalty if you knowingly or under circumstances amounting to gross negligence have made a false statement or an omission on your 2016 return.

The penalty is equal to the greater of:

• $100; and
• 50% of the understated tax and/or the overstated credits related to the false statement or omission.

The trustee or tax preparer will also be subject to penalties if, due to culpable conduct, they prepare, or participate in the preparation of, income tax or information returns, forms, or certificates on behalf of another person and make false statements.

Interest

We pay compounded daily interest on a tax refund starting on the latest of:

• the 31^st day after the return is due;
• the 31^st day after the return is filed; or
• the day after the overpayment arises.

We charge interest on unpaid amounts and the total amount of penalties assessed. We calculate this interest, compounded daily, at a prescribed rate from the date the unpaid amount was due until the date of its payment.

Cancellation of penalties or interest

The CRA administers legislation, commonly called the taxpayer relief provisions, that gives the CRA discretion to cancel penalties or interest when taxpayers are unable to meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to cancel penalties or interest is limited to any tax year, fiscal period or reporting period, as applicable, ending in any of the 10 calendar years before the year in which you make your request.

To make a request, fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information about the cancellation of penalties or interest and how to submit your request, go to Taxpayer relief provisions.

Forms and publications

• Form T3 APP, T3 Application for Trust Account Number
• Form T3RET, T3 Trust Income Tax and Information Return
• Guide T4013, T3 Trust Guide

Date modified:

2017-01-04