What happens if you don’t file your taxes (and how to fix it)

For one woman, “soon” turned into 14 years. She had worked at the same job for over 20 years, with regular deductions taken from her paycheques. But after becoming overwhelmed by the tax process, she stopped filing altogether. What began as a single missed return became years of unfiled taxes—something that felt harder to face with time.

As a non-profit credit counselling agency, we at Credit Canada often see how easily this can happen. One missed return can quickly turn into several, creating stress around something that once felt routine. This woman came to us through our financial coaching program, Credit Canada GOLD, where she was supported in gathering her documents and catching up on her filings. In the end, she received a refund of $18,484 (money she hadn’t realized she was owed) and used it to pay down a significant portion of her debt.

Situations like this show what’s at stake when taxes go unfiled. Falling behind can mean missing out on refunds or benefits, facing penalties if money is owed, and carrying ongoing stress that affects overall financial well-being. In this article, we’ll explore why Canadians delay filing, the hidden financial and emotional costs, and how to safely catch up.

Why Canadians delay filing taxes

Many Canadians don’t fall behind on their taxes because they’re careless; it’s often the result of real-life stress. Job loss, illness, divorce, caregiving responsibilities, or other life transitions can push tax filing to the bottom of their priority list. Canada Revenue Agency (CRA) data shows nearly 2.9 million Canadians filed their returns after the deadline for the 2023 tax year, highlighting how common tax procrastination is.

Fear can also play a role. Some people worry they’ll owe money, so they delay filing until they feel more financially prepared. Others assume the process will be complicated or misunderstand how late-filing penalties work, which can make the task feel overwhelming and easier to keep putting off.

“Many clients tell me they avoided filing because they were afraid of owing more than they could pay,” says Becky Western-Macfadyen, Financial Coaching and Education Manager at Credit Canada. “But the real cost of procrastination is often higher than the taxes themselves.”

Hidden costs of not filing

Putting off your tax return may feel like a temporary solution, but over time, it can impact several areas of your life. The most obvious costs are financial. If you’re owed a refund, you won’t receive it until you file. You may also miss out on important government benefits and credits, such as the Canada Child Benefit or the GST/HST credit, which are calculated from your tax return. At the same time, if you owe taxes, penalties and interest continue to grow the longer the return goes unfiled.

There are also emotional costs that often get overlooked. Many Canadians experience growing stress, anxiety, and even shame the longer they delay filing. That can lead to avoidance behaviour—ignoring reminders, putting off financial decisions, or feeling stuck about where to start. It also affects long-term financial planning. Not having up-to-date tax returns can make it harder to apply for loans, mortgages, or other credit as lenders typically require recent tax returns or Notices of Assessment as proof of income, especially for people who are self-employed. 

The timeline below shows what typically happens when taxes go unfiled:

Immediately after the deadline: Late-filing penalties may apply if you owe taxes.

Months later: Interest begins accumulating on unpaid balances.

Over time: You may miss refunds and lose access to certain government benefits.

Longer term: Unfiled returns can complicate loan applications, mortgages, and financial planning.

For many people, the situation builds gradually. What starts as one missed deadline can turn into several years of unfiled returns before they realize how much it’s affecting their finances and emotions.

Understanding CRA rules and options

If you file your tax return late and you owe money, the CRA may apply a late-filing penalty. This is typically 5% of the balance owing, plus 1%for each full month the return is late, up to a maximum of 12 months. Interest will be charged until the balance is paid. Individuals expecting a refund will not face penalties; however, they won’t receive that refund or have access to government benefits and credits until they file.

For Canadians with several years of unfiled returns or previously unreported income, the CRA offers the Voluntary Disclosures Program (VDP). This program allows taxpayers to complete their tax information before the CRA contacts them. If the disclosure is accepted, you may avoid legal action and have certain penalties reduced.

“The Voluntary Disclosure Program is designed to help Canadians get back on track,” says Western-Macfadyen. “It’s always better to proactively address the situation than wait for CRA enforcement.”

To qualify, the disclosure must be voluntary (meaning you contact the CRA before they contact you), complete (including all relevant information for the years being disclosed), and related to tax years that are at least one year overdue.

The CRA also guides people who need to file past returns, including how to obtain missing documents, submit older returns, and set up payment arrangements if you owe money.

How to catch up

Getting back on track with unfiled taxes can feel daunting, but approaching the process one step at a time can make it more manageable. Start by collecting past tax documents, including T4’s, T5’s, receipts for deductions, and notices of assessment if available. The CRA’s My Account portal can help you access missing slips or previous notices.