What Happens If You Don’t File Taxes?
Implication for Your Budget and Finances

By Julie Jaggernath

Twenty-four percent of tax returns resulted in a balance owing, which on average was $8,000. If you owe and file on time, even if you can’t pay, you avoid the late filing penalty and interest charges on that amount, on top of what you owe. Seventeen percent of returns filed this year so far are nil returns, with no balance owing and no refund due. Even by filing a nil return these Canadians still potentially qualify for any federal and provincial income-tested programs or services in their province of residence.

How Budgeting and Tax Refunds Go Together

So, whether there is an unexpected refund waiting for you, or an amount owing, it’s still worth it to file on time and stay on top of your obligations. And with the high cost of living, any extra cash in your budget goes a long way towards making ends meet and not relying on credit cards to get by.

While receiving a larger than expected refund each year can indicate that your employer or pension provider may be deducting too much income tax from your pay, most people are happy to get it back as a surprise savings they may have otherwise spent throughout the year. The lump sum of money most of us will get can be used for anything from paying off debt, to jump starting an emergency savings account, or even treating yourself to a little splurge. Take a look at your budget to see where you stand in relation to your goals before you decide how best to use your tax refund.

12 Excuses People Make for Not Filing Their Taxes – Does Yours Stack Up?

Federal Benefits and Credits Put Cash Into Your Account

Your family’s reported income determines which benefits and credits you may be eligible for, both at the federal and provincial levels. There are various benefits that relate to age as well as income level.

People with kids are typically familiar with the Canada child benefit (CCB), a monthly tax-free payment intended to help with the cost of raising children under eighteen. Because the amount of this benefit is tied to the total family income, it is important for both parents, if applicable, to file their tax returns on time, otherwise the payments may stop until the returns have been filed and assessed. Every July, the CRA calculates the total CCB amount for the coming year based on the information from the tax returns.

For many Canadians, the CCB can amount to hundreds of extra dollars every month. Because the benefit is indexed to inflation, the amount will increase even if income doesn’t. It can be a lifeline when living costs are high, helping to take some of the edge off high prices. If you have children, check out the Child and Family Benefits Calculator to see how much CCB you may be entitled to.

For working Canadians with lower incomes there’s the Canada workers benefit (CWB) and the Guaranteed Income Supplement (GIS) if you’re a lower income senior who also receives Old Age Security. Same as for the CCB, both of these programs depend on the income reported on your assessed tax return. If you file late, your benefits could be disrupted until your return is processed.

Beginning in July 2026, the new Canada Groceries and Essentials Benefit (CGEB) replaces the previous GST/HST credit that many Canadians in lower income brackets are likely familiar with. Your eligibility, including the amount received, is still determined automatically every July using the income information from the most recently assessed return, and the structure remains the same as the old program, with payments received every three months. There will be a temporary boost of 25% to payments from 2026 to 2031 to assist with the higher prices of everyday goods.

Provincial & Territorial Benefits and Needs-Based Programs Require Your Income

There are various provincial and territorial benefits along with those from the federal government, as well as income-tested programs and services across the country. If you don’t file your taxes every year, you will be unable to qualify for these programs, as well as other low or no-cost options for various services in your community, which usually require up-to-date income information from your tax return. If you are unable to provide this proof of income you may miss out on everything from lower-cost transit and recreation options from your city to provincial assistance with pharmaceutical prescriptions and rental subsidies.

For example, at the provincial level in BC, the Fair PharmaCare deductible (which helps with the cost of prescriptions) is determined by reported income. The deductible for Fair PharmaCare is the amount you must pay before your eligible prescriptions are covered for the balance of the year. The Fair PharmaCare program in particular restricts retroactive reimbursements, so it’s important to keep your enrolment current to receive the benefits.

Provincial and territorial programs that are not administered by the federal government require you to consent to CRA sharing your reported income information with the provincial program. It’s not done automatically, and it is usually valid until you revoke your consent or when you miss reporting your income via your tax return – another reason to stay on top of filing every year.

Subsidized Daycare, Sports, Activities and Student Loan Applications

If your children attend subsidized daycare or participate in activities eligible for subsidies or grants, eligibility is determined by reported household income because these are needs-based programs. Student loans and grants for post-secondary are also needs-based and parents’ reported income is often needed on applications for students attending university, college, or technical school in the years right after high school. A student’s own taxes may need to be filed up to date as well.

Assisted Living, Nursing Homes, Disability Credits

For assisted living or nursing home accommodations for seniors or those with a disability, payment is based on affordability, which is again determined by the previous year’s reported income.

Penalties for Filing Late

When you earn income, you must file an income tax return, but you may not know what you owe until after you’ve filed. If you owe and file on time, even if you can’t pay right away, you avoid the late filing penalty and interest charges on that amount. If you can pay part of what you owe, pay what you can afford; some is better than none.

CRA is the most powerful creditor in Canada, so payments on what you owe the government should be prioritized. The easiest way to contact them is to call them directly at the number provided on their website; you can speak with someone and make reasonable payment arrangements, which can go a long way towards reducing stress with peace of mind knowing that you are starting to manage your debts. If you need help, one of our credit counsellors would be happy to review your situation with you, answer your questions, and provide you with guidance around how to proceed.

File Your Income Tax Return – Here’s How to Get Started

If you’re not sure where to begin when filing your income tax return, CRA has a comprehensive webpage to help you get started. Read down the list of topics and click on those that apply to you. Then gather your paperwork and income slips so that you’ve got everything handy. If you have an online account, by the end of February the CRA will have received many of your income slips and they will be visible directly in your account – you can even use a free NETFILE software program to automatically enter them into your return using a feature called Auto-fill My Return, making filing simpler than ever before. However, it’s still important to double-check everything, so take your time before hitting submit to make sure nothing is missing.

If you need more help, ask a family member, hire a tax professional, or try your hand at filing yourself using one of the CRA-approved filing software programs. Most of these programs are user-friendly, offer step-by-step guidance, and have easy to follow instructions. If you have a modest income and your tax situation is straightforward, you may be able to reach out to a free tax clinic in your community for assistance as well.

Tax Debt Help for Your Budget Whether Your Filed Late or On Time

There’s a lot riding on keeping your taxes filed up to date and CRA has extra staff available during filing season to answer any questions that may come up. Even if you miss the deadline of April 30th, it’s still worth it to file as soon as possible. And if you end up owing, we’re here to help you come up with a realistic payment plan to pay off your tax debt. So, rather than panic, keep calm and file on.

Last Updated on June 3, 2026