💥How to deal with a large fine from the CRA? The consequences of not properly closing your business are severe!

💥The letter from CRA clearly stated a line of numbers - "Taxes owed + penalties + interest = 18,000"!

Mike once owned a very popular restaurant. Before 2020, there was a line every day at lunchtime. He sweated profusely in the kitchen, yet felt incredibly fulfilled. He filed and paid his taxes on time every year, and his communications with his accountant were meticulously organized.

But three years ago, a family crisis struck. Her parents were in poor health, and her children were preparing to go to college. She no longer had the energy to run the restaurant, and the unexpected 20-year crisis led to a sharp drop in income. She closed the shop in early 2022.

Mike thought, "At least I don't owe the tax bureau any money, and the company has no income, so I can finally take a break."

💣However, a letter from CRA two years later scared Mike! At first, he thought it was a scam, but then he thought it looked very real. So he checked the company's status with CRA and found that the company was still active on the account and had received a reminder letter stating that the company had outstanding debts that needed to be paid.  

Mike finally found us online to understand the situation. After giving us authorization, he found out that  The company did not file a tax return for 22 years, so the CRA assumed that the profits were the company's pre-collected unpaid taxes, and based on this arrears, added penalties based on interest, ultimately forming this "sky-high bill"  .

 I believe that after reading this, everyone has understood the origin of this huge sum of money, so how can we avoid it?

My store is closed, why did CRA send me a bill?

As long as your company is registered, it's considered "in operation." Even if you haven't earned any income or issued any invoices, the CRA still requires you to file a T2 Corporate Income Tax Return annually.

✅ If you've previously registered for HST, you must also file a Final Return.

✅ If you have a payroll account, you must also apply for a Close Account.

Otherwise, the system will deem you "refusing to report income" and automatically calculate estimated tax, along with a penalty.

How are CRA fines calculated?

After checking for Mike, we found the following:

• First year of failure to file: Minimum fine of $1,000

• Second year of failure to file: Double the fine

• Additional interest and late fees, increasing year by year

• The CRA may even transfer her file to Collections (collection recovery)

That's not the worst: If she later tries to start a new business, apply for a tax refund, or apply for a loan, the CRA system will show an "unprocessed record," immediately impacting her credit score.

So what should you do if you get a ticket?  Don’t be in a hurry!

So what is the correct approach? Closing your business?

If your company no longer intends to operate,don't just leave it alone; you should officially dissolve it.The entire process is actually not complicated at all 👇

You can check out our previous tutorial on "Dissolving Your Company"!You can easily complete it step by step! And dissolving your company isn't necessarily your final option. We can also handle other procedures, such as zero tax return.

The cost isn't as high as you might think.If all tax returns are complete, with no outstanding taxes or unpaid profits,the cost can be as low as NT$300 plus tax✅. With zero tax return, it can be as low as NT$100.

All procedures can be completed remotely, making it both secure and compliant: Sign electronic documents → Accountant filing → Government certification.

Ultimately, we helped Mike file two years of T2 returns. After filing, he acknowledged his mistakes with the CRA and paid the outstanding balance and fines. He also applied for a CRA penalty waiver (Request for Taxpayer Relief). The company's formal deregistration process will have to wait until all tax records are cleared.

A few months later, she received a letter from CRA, the bill was adjusted to 0, and part of the fine was refunded. At this time, Mike transferred the fine, and we officially started the closing business cancellation process until the documents showed that the company had been officially dissolved.

Remind everyone, Many people think that a company will "naturally end" if it has no income and is not operating. However, in Canada, a company is an independent legal entity and it will not automatically disappear.