You're behind on your books. Here's what it costs to fix, and what it costs to wait
Nobody gets three years behind on purpose. It happens one busy month at a time, and then the pile is big enough that opening it feels worse than ignoring it.
Catch-up bookkeeping is priced by how much reconstruction it needs, not by how many months you missed. The cost of waiting is more predictable than the cost of fixing: CRA charges 5% of your income tax balance plus 1% for every full month you're late, a separate GST/HST penalty, payroll penalties from 3% to 10%, and prescribed interest at 7% running on every outstanding balance from the day it was due. If your oldest unfiled year is more than a year past its due date and CRA hasn't contacted you yet, the Voluntary Disclosures Program may be on the table — that's a conversation for an accountant or a tax lawyer. If CRA reaches out first you don't lose the program, but you drop into the prompted category, where interest relief falls from 75% to 25%.
Why catch-up is priced differently from monthly bookkeeping
Monthly bookkeeping is maintenance. The bank feed is connected, last month's balances are already agreed, and the work is categorising a known volume of transactions and reconciling to a statement in hand.
Catch-up is reconstruction. There's no agreed starting point, so the first job is finding one — usually a prior year-end an accountant actually filed from. Everything after that gets rebuilt forward: statements pulled account by account, transactions matched to source documents that may or may not exist, GST/HST recalculated period by period rather than looked up, and payroll rebuilt against what was actually remitted.
That matters in one practical way. Monthly work can be quoted from a transaction count; catch-up can only be quoted honestly after someone has looked at your accounts, because what drives the hours — whether the documents exist — is invisible until they do.
Two years behind is not twice one year behind. Each additional year adds missing receipts, memory you no longer have, and another set of returns whose penalties compound on the ones before. The work per month goes up as the months get older, not down.
What CRA charges while the books sit
These penalties run in parallel. A corporation late on its T2, its GST/HST and its payroll remittances is paying all three at once, plus interest on all three.
Income tax: 5%, then 1% a month
The late-filing penalty is 5% of the balance owing on the return, plus 1% of that balance for each full month the return is late, to a maximum of 12 months. On a $10,000 balance that's $500 the day you're late, and another $1,200 by the time a year has passed.
A repeat rate of 10% plus 2% per month, for up to 20 months, exists — but only if both are true: you were charged a late-filing penalty in one of the three preceding years, and CRA issued a formal demand to file. Most people who assume they're in that bracket are not.
GST/HST: A + (B × C)
The GST/HST late-filing penalty is a formula, not a flat rate. A is 1% of the amount owing, B is 25% of A, and C is the number of complete months overdue, capped at 12.
On $10,000 of GST/HST owing, a year late: A is $100, B is $25, and twelve months of B is $300 — so the penalty is $400. Separately, failing to file after CRA issues a demand is $250, and failing to file electronically when you're required to is $100 the first time and $250 for each return after that. The mechanics of periods and due dates are on our GST/HST filing deadlines page.
Payroll: 3, 5, 7, 10%
Payroll surprises people, because the penalty attaches to the remittance amount and starts almost immediately. One to three days late is 3%; four to five is 5%; six to seven is 7%; more than seven days, or never remitted, is 10%. A second or subsequent assessment in the same calendar year, where the failure was knowing or grossly negligent, is 20%. On a $5,000 remittance that never went in, that's $500 on top of the $5,000 you still owe. Our payroll remittance due dates page sets out your remitter type, which decides when the clock starts.
Interest, on top of all three
On top of every penalty above, CRA charges prescribed interest on overdue amounts, running on the outstanding balance from the day it was due. For both Q3 and Q4 of 2026 that rate is 7% on overdue taxes, CPP contributions, EI premiums and GST/HST. It is reset quarterly, so once we're past December 2026 take the rate from CRA's prescribed interest rates index rather than from any page quoting it, including this one.
Sources: CRA late-filing penalty page (updated 2026-01-20); GST/HST filing penalties (2025-06-16); penalty for late remitting or failure to remit (2026-06-11); prescribed interest rates index. All four penalties in one table: every CRA late penalty a small business can trigger.
The six-year rule, and the trap inside it
You have to keep your business records for six years from the end of the last tax year they relate to. Most people know that number; fewer know the sentence next to it.
If you file a return late, the six years run from the date you file it — not from the end of the tax year. File your 2021 return in 2026 and you are keeping those 2021 records into the 2030s. Being behind doesn't just delay the filing; it extends how long CRA can ask you about it.
Two more rules that come up constantly in catch-up work. Records have to be kept at your place of business or your residence in Canada unless CRA gives written permission otherwise, and destroying them early takes Form T137 or a written request to your tax services office. Scanned receipts need to clear a specific bar: the image has to be an accurate reproduction that gives the same information as the paper document, and CRA's imaging rule points at a named standard — CAN/CGSB-72.34, Electronic Records as Documentary Evidence. Image your paper records to that standard and the images become the permanent record, so the paper can be destroyed. CRA's own wording on the other half of that is blunt: "If your business cannot meet the CGSB standards when imaging, it has to keep the original documents." So scanning a shoebox does not, by itself, let you throw the shoebox out.
Source: CRA where to keep your records and for how long (updated 2026-08-03) and acceptable formats and imaging (2026-08-03).
The Voluntary Disclosures Program, as it works since October 1, 2025
The VDP lets you come forward about an error or omission before CRA finds it, in exchange for relief from penalties and some interest, plus protection from criminal prosecution and from gross negligence penalties on the matter disclosed. It was restructured on October 1, 2025 into two categories, and the gap between them is the whole reason not to wait.
| Category | Penalty relief | Interest relief |
|---|---|---|
| Unprompted — you came forward first | 100% | 75% |
| Prompted — CRA had already been in touch | up to 100% | 25% |
The wording is not symmetrical. Unprompted gives a flat 100% penalty relief; prompted gives up to 100% — a ceiling, not a promise. And interest relief drops from 75% to 25%. With prescribed interest at 7% running on every year of outstanding balance, that drop is usually the largest single number in the decision.
The three validity conditions
- Eligible. The application has to be voluntary, it has to relate to a tax year that is at least one year past its filing due date, and it has to involve an error or omission with interest and/or penalties attached.
- Complete. All supporting documents, all the years involved, and prompt and complete responses to whatever CRA asks for afterwards.
- Payment — or a request for a payment arrangement — for the estimated tax owing. Not being able to pay in full does not by itself disqualify you.
Two of those conditions do most of the work in practice. At least one year past the filing due date means a return you missed four months ago is not a VDP matter at all — you just file it and pay what's owed. And voluntary means before CRA contacts you about it. Once an enforcement action or a request has landed, you are in the prompted category at best.
Whether to file a VDP application is not a bookkeeping decision. It turns on how much you disclose, over how many years, and what you're admitting in writing to a tax authority — an accountant or tax lawyer, before anyone touches the file. What a bookkeeper does is build the record it has to be supported by; the "complete" condition above is a bookkeeping problem.
Source: CRA changes to the Voluntary Disclosures Program (updated 2025-10-01) and Information Circular IC00-1R7 (2025-09-10).
What catch-up actually costs
We won't publish a catch-up rate here, and you should be wary of pages that do. Every published Canadian bookkeeping price — per month, per year of catch-up, per transaction — is a company's own self-report about its own service. That's a marketing number, not a market rate. What we can tell you is what moves it, so you can predict roughly where you'll land before anyone quotes you.
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How many accounts
Every bank account, credit card, line of credit and payment processor is a separate reconciliation, every month you're behind. Two accounts and six accounts are not the same job.
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Transaction volume
Not revenue — count of lines. A consultant billing well with forty transactions a month is far cheaper to catch up than a café with eight hundred.
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How many months
The obvious factor, and the least important. Months scale the work; the other four set the rate per month.
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Whether documents exist
The biggest swing by far. A shoebox that matches the bank feed is ordinary work. Reconstructing what a $400 hardware store debit in March 2024 was for is not, and no honest quote can be given until someone has looked.
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GST/HST and payroll
Both mean returns and remittances get rebuilt and reconciled, not just categorised, and both bring their own penalty exposure. A registrant with employees is a materially bigger job than a sole proprietor under the registration threshold.
For the rate context behind all this, what a bookkeeper costs in Canada works from Statistics Canada wage data rather than self-reported price lists, and how to vet a bookkeeper covers what to check before handing anyone your file.
What to do this week
- Find the last year an accountant actually filed for you. Until you have that, nobody can quote the job properly.
- Download every bank and credit card statement from that date forward, in PDF, before anything else. How much statement history a bank keeps online varies from bank to bank, and it is often shorter than the six years you have to keep records for — so pull them while you can rather than assuming they will still be there.
- Log into CRA's My Business Account and write down what's actually outstanding — returns not filed, balances assessed, any letters. What you assume is usually worse than reality on the returns and better than reality on the interest.
- If your oldest unfiled year is more than a year past due, call an accountant or tax lawyer about the VDP before you file anything. Filing first can cost you the unprompted category.
- Start keeping the current year properly from today. Getting current from here forward is cheaper than adding another year to the pile while you decide.
Get a straight number instead of a growing one
We'll look at your actual accounts and tell you what the catch-up involves and what it costs — so you can stop paying 7% prescribed interest on every outstanding balance to postpone a decision you've already made.
Ask about catch-up bookkeepingQuestions people actually ask
How far back do I have to catch up my bookkeeping?
Back to the last year that was properly filed. That's usually the last year an accountant prepared a return from, because that year-end gives you agreed opening balances to build forward from. If nothing has ever been filed, you go back to the start of the business. Keep in mind that records have to be kept six years from the end of the tax year they relate to — and if you file a return late, those six years run from the date you file it, not from the year-end.
Will CRA go easier on me if I come forward before they contact me?
Yes, and the difference is large enough to be the main financial decision in your file. Under the Voluntary Disclosures Program as restructured on October 1, 2025, an unprompted disclosure gets 100% penalty relief and 75% interest relief. A prompted one — where CRA has already been in touch — gets up to 100% penalty relief and only 25% interest relief. Both give protection from criminal prosecution and from gross negligence penalties on the matter disclosed. Whether to apply is a decision to make with an accountant or a tax lawyer, not a bookkeeper.
Can I use the Voluntary Disclosures Program for a return I missed last month?
No. One of CRA's validity conditions is that the application relates to a tax year that is at least one year past its filing due date. A recently missed return isn't a VDP matter — you file it, pay what's owed, and wear the late-filing penalty and interest. The program exists for older problems, and applying to it is not a way to avoid a penalty on something current.
How much does catch-up bookkeeping cost in Canada?
There is no published rate you can rely on, and that is the honest answer rather than a dodge. Every Canadian bookkeeping price you can find online is a company's own self-report about its own service, so it is a marketing figure rather than a market rate. What the price actually depends on is the number of bank and credit card accounts, your transaction volume, how many months are outstanding, whether the source documents still exist, and whether GST/HST and payroll are involved. Missing documents is the biggest single swing, which is why no one can quote your file properly without looking at it.
What does CRA charge me for every month I wait?
Several things at once. On income tax it's 5% of the balance owing plus 1% for each full month late, to a maximum of 12 months. On GST/HST it's a formula: 1% of the amount owing, plus 25% of that 1% for each complete month overdue, capped at 12 months. On payroll it runs from 3% at one to three days late up to 10% past seven days. And prescribed interest applies on top of all of it, at 7% for both Q3 and Q4 of 2026, running on each outstanding balance from the day it was due. The rate is reset quarterly, so check CRA's prescribed interest rates index for the current quarter.
Should I just file everything myself to stop the penalties?
Filing quickly is usually right, with one important exception. If your oldest unfiled year is more than a year past its due date and you may want to use the Voluntary Disclosures Program, filing first can move you out of the unprompted category and cost you most of the interest relief. Speak to an accountant or a tax lawyer before you submit anything in that situation. If you're only a few months behind on a current return, there's nothing to weigh — file it, pay it, and get the interest clock stopped.