CRA penalty for not filing electronically: $1,000 on a paper T2

What each return costs when it goes in on paper

There is no single electronic filing rule. Each return type has its own requirement and its own penalty, and a client can trip several in the same year.

The dollar amounts come straight from section 162 of the Income Tax Act laws-lois.justice.gc.ca. The GST/HST amounts come from the CRA's filing penalties page canada.ca. An individual filing their own T1 isn't on the list: the T1 rule binds the paid preparer, not the taxpayer canada.ca.

The corporation owes $1,000 for every T2 it files on paper

For tax years starting after 2023, all corporations have to file the T2 electronically, and the CRA charges $1,000 when a corporation that must file electronically doesn't canada.ca. The old gross revenue threshold is gone, so a small CCPC with one shareholder is caught the same as a large one. The four exceptions are listed in ITR 205.1(2): insurance corporations, corporations not resident in Canada, corporations reporting in a functional currency, and corporations exempt from tax under section 149 laws-lois.justice.gc.ca.

The $1,000 under ITA 162(7.2) is charged per return, and it's separate from any late filing penalty laws-lois.justice.gc.ca. A T2 filed late and on paper draws both; the late filing math is on the T2 late filing penalty page.

Your firm's own penalty sits on top. If you prepared that T2 for a fee and you're a tax preparer for the year, ITA 162(7.3) adds $100 for the return you should have filed electronically laws-lois.justice.gc.ca. The preparer rule excludes only the first three corporate exceptions (insurance, not resident, functional currency) under ITA 150.1(2.4)(b), so a section 149 corporation's T2 is outside the corporation's own requirement but not automatically outside yours, unless it's a return type the CRA doesn't accept electronically laws-lois.justice.gc.ca.

How the slip penalty scales with the number of slips

Since January 1, 2024, more than 5 information returns of one type for a calendar year must be filed electronically. That replaced the old rule that let a filer with 50 or fewer returns use paper canada.ca. The requirement is in ITR 205.1(1), and it counts per type laws-lois.justice.gc.ca.

Each slip is an information return, and each type is scored on its own. The CRA's example: 51 T4 slips and 51 T5 slips on paper cost $250 for each type, $500 in total canada.ca. The two electronic routes are Web Forms, built for smaller returns of up to 100 slips, and Internet file transfer of an XML file up to 150 MB canada.ca. Due dates are on the T4 slip deadline page, and the steps are in filing T4 slips online.

How the tax preparer rule counts your returns

As of January 1, 2024, a tax preparer who accepts payment to prepare more than 5 returns in a calendar year must file them electronically. The rule covers T1, T2 and T3 returns canada.ca. ITA 150.1(2.2) sets three separate groups (corporations, individuals other than trusts, estates and trusts), and you're a tax preparer for a group once you're paid for more than five returns in it. Subsection 150.1(2.3) then lets five returns in each group go on paper laws-lois.justice.gc.ca.

Worked example: in 2026 your firm is paid to prepare 40 T1 returns and 12 T2 returns, and it mails 8 of the T1s and 7 of the T2s. Five of each group may be paper filed, so the penalty applies to the rest.

That $275 is the firm's penalty only. Each of the 7 corporations that should have filed electronically still owes its own $1,000 under ITA 162(7.2) laws-lois.justice.gc.ca. The preparer allowance never shields the client.

An employee who prepares returns as part of their job isn't a tax preparer. A preparer who applied for EFILE and wasn't accepted, or had EFILE suspended or revoked, is outside the rule, but T2s that aren't restricted must then go in by another electronic method. An amended T1 sent on paper, or amended in software and then printed and mailed, counts as a paper return; use ReFILE instead canada.ca. Registration is covered on the EFILE registration page.

Worked example: one client, four paper filings, $1,575

Your client is a CCPC with a December 31, 2025 year end and 22 employees. In 2026 its office manager mails everything: the 22 T4 slips for 2025 (on time), the 2025 T2, two quarterly GST/HST returns, and a cheque for its $15,000 T2 balance.

The GST/HST pair costs $350 because the CRA charges $100 the first time and $250 for each return after that canada.ca. Filing through GST/HST NETFILE avoids it. Every registrant except charities and selected listed financial institutions must file electronically for periods ending in 2024 and later canada.ca. The statutory hook is ETA 278.1(2.1) laws-lois.justice.gc.ca. The cheque fails ITA 160.5(2), which requires an electronic payment for any amount over $10,000 unless the payer can't reasonably pay that way laws-lois.justice.gc.ca. Payment routes are on paying corporate tax, and the same rule applies to payroll remittances.

None of this is tax owing, and none of it depends on the client being late. A client that files every return on time can still collect $1,575 for the format alone.

Can these penalties be cancelled?

Sometimes. The CRA can waive penalties when events beyond your client's control prevented them from meeting the obligation canada.ca. Relief covers extraordinary circumstances such as a flood, fire, serious illness or a death in the immediate family, and CRA delays, errors or incorrect information. Requests must relate to a tax year or fiscal period ending in the 10 calendar years before the year you apply. The CRA lists financial hardship as a ground for waiving interest, not penalties canada.ca. The form and process are on the taxpayer relief page.

For GST/HST, a registrant that can't file electronically can ask for an exemption by letter, and the CRA decides case by case canada.ca. For payments, the statute itself excuses a payer who cannot reasonably pay electronically laws-lois.justice.gc.ca. A preference for cheques doesn't meet that test.