CRA Debt & Penalty Forecaster
Calculate how much daily compounded interest and late-filing penalties will add to your unpaid tax debt—and discover how a Consumer Proposal stops CRA enforcement instantly.
Unlike commercial banks, the Canada Revenue Agency (CRA) does not require a court order to freeze bank accounts, attach T4 employment wages, or intercept subcontractor invoices. However, filing a Consumer Proposal or Bankruptcy triggers an immediate federal Stay of Proceedings that legally freezes CRA collection action.
CRA Debt & Penalty Forecaster
Projected Debt Growth
Consumer Proposal Settlement
- Immediate BIA Stay: Stops all future CRA compounding interest and late-filing penalties immediately.
- Frozen Legal Power: CRA cannot freeze bank accounts, attach wages, or issue Requirements to Pay once filed.
- 0% Interest Payment Plan: Repay the settled balance over 36 to 60 affordable monthly installments.
How the CRA Calculates Penalties & Daily Compound Interest
Tax debt in Canada grows at an accelerated rate due to statutory penalties combined with **daily compounding interest** at the prescribed federal rate (set quarterly by the Minister of National Revenue).
| Penalty Category | First-Time Late Filer Rate | Repeat Late Filer Rate (Within 3 Years) |
|---|---|---|
| Base Late-Filing Fee | 5% of unpaid balance instantly | 10% of unpaid balance instantly |
| Monthly Compounding Penalty | +1% for each full month late (max 12 mos) | +2% for each full month late (max 20 mos) |
| Maximum Statutory Penalty Cap | 17% Total Penalty | 50% Total Penalty |
| Prescribed Interest Rate | Prescribed annual rate, compounded daily | Prescribed annual rate, compounded daily |
Special CRA Debt Types: Personal & Corporate Liabilities
Personal Income Tax (T1)
T1 tax debt is 100% dischargeable in a Bankruptcy or Consumer Proposal. The CRA is treated as an unsecured creditor alongside credit cards and personal loans.
GST/HST & Payroll Deductions
CRA treats unremitted GST/HST and payroll (CPP/EI) as "trust funds." Directors of corporations can be held personally liable for these debts under Director's Liability assessments.
Tax Deemed Super-Priority
In certain commercial scenarios, unremitted payroll taxes form a statutory charge over corporate accounts receivable and assets, making early Licensed Insolvency Trustee intervention critical.
Frequently Asked Questions
The CRA itself has no internal policy to negotiate a reduction in principal tax debt—they will only negotiate full repayment plans or consider penalty/interest relief under taxpayer relief provisions. However, under the federal Bankruptcy and Insolvency Act (BIA), a Licensed Insolvency Trustee can legally compromise CRA principal tax debt through a Consumer Proposal or Bankruptcy.
Yes. Filing a Consumer Proposal creates an immediate Stay of Proceedings under Section 69 of the BIA. The LIT serves formal legal notice to the CRA, forcing them to halt active Requirements to Pay, unfreeze bank accounts, and stop payroll garnishments.
Yes. The CRA will generally require all outstanding tax returns (T1 personal, T2 corporate, or GST/HST) to be prepared and filed up to the date of the proposal so the exact claim amount can be verified before voting on your proposal offer.
Find Your Personal Debt Relief Solution
Licensed Insolvency Trustees are here to help. Get a free assessment of your options.
Legally Cut Your Debt By 80% And Stop Interest Charges
Stop Interest Charges Immediately
Unfreeze Bank Accounts
Stop Wage Garnishment
Stop Legal Actions
