What does the CRA charge if Form RC268 is filed late?
Form RC268 goes in with your return, so what is at stake is the late filing penalty on that return rather than a separate charge for the schedule itself. For the 2025 tax year the penalty is 5 per cent of the balance owing, plus 1 per cent of that balance for each full month the return is late, to a maximum of 12 months. Two things follow. If the return leaves no balance owing, there is nothing for the percentage to work on. And because the penalty is measured against the balance, claiming the deduction you are entitled to reduces the penalty as well as the tax.
I owe no tax after the deduction, is there still a penalty?
The late filing penalty for the 2025 tax year is calculated as a percentage of the balance owing, so where the return leaves nothing owing the calculation produces nothing. That is not the same as saying a late filing is free. The deduction is treaty based and it has to be claimed on a filed return, so an unfiled year is an unclaimed deduction, and the interaction with your Canadian registered plan room stays open for as long as the year does. Interest also runs on any balance that does exist. File the year, claim the deduction, and deal with the balance once it is known rather than guessing at it.
Is the penalty higher if I have filed late before?
It can be, but not simply because it happened twice. For the 2025 tax year the higher charge is 10 per cent of the balance owing plus 2 per cent for each full month, to a maximum of 20 months, and it applies where the CRA issued a demand to file and charged a late filing penalty in any of the three preceding tax years. Both parts have to be present. A second late filing on its own is not the trigger, and the higher figures are not a doubling of the ordinary ones, because the period they can run for is different as well. Check the correspondence for a demand before assuming which rate applies, and read it against the assignment years, because the year the demand relates to is not always the year you are now filing.
Does the late filing penalty keep growing until I file?
Not indefinitely. For the 2025 tax year the ordinary penalty stops accruing after 12 full months, and the higher charge that follows a demand to file stops after 20. The penalty itself does not compound. Interest is the part that keeps moving: it compounds daily on the unpaid balance and is not limited by a month count. So the shape of the exposure changes over time. Early on, the penalty is the larger figure and filing quickly is what saves money. On a year that has been outstanding a long while, the penalty has settled and it is the interest on the balance that is still growing.
Does an unfiled year cost me Canadian registered plan contribution room?
It leaves the question open, which is the practical cost. The deduction for contributions to the United States plan is treaty based and it interacts with the room you have for Canadian registered contributions, so until the year is filed and the claim settled you do not know what the room for the following year should have been. People in that position often carry on contributing in Canada on a standing instruction while the unfiled year sits there. Deal with the years in order, claim the plan contributions on each, and let the registered position follow from a settled figure rather than from an assumption made years earlier.
Can I still claim the deduction for a year I never filed?
The deduction is claimed on the return, so the way to claim it is to file the year. That is worth doing even where the year is old. The claim is treaty based and it also bears on your Canadian registered plan room, so an unfiled year leaves two questions open rather than one. Before filing, gather the plan statements for that year and the payroll records connecting the contributions to the work in the United States, because an administrator in another country can be slow to respond. Then file with the deduction in place, so that any penalty is measured against the balance that remains after it.
How does cross-border tax planning work?
It starts with facts rather than structures: which countries have a claim on you, what each one taxes, and where the two overlap. From there the decisions are about order and timing — which country taxes first, where relief is claimed, and whether a filing or a certificate has to be in place before money moves rather than after. Most of the value is in the sequencing, because relief claimed late is usually relief recovered slowly. See international tax planning.
How many days can I spend in a country before I become tax resident?
It depends on the country, and a day count is only ever the start. Many use a threshold in a tax year, some also look at averages across several years, and some have no day test at all and decide on where your home and life are. Two countries can both conclude you are resident, which is what the treaty tie-breaker exists to settle. Counting days without checking the tie-breaker is how people end up filing as resident nowhere. See the residency tie-breaker.
