Is there a late filing penalty for Form T1-ADJ?
No. The form adjusts a return that has already been filed, so it has no filing deadline of its own and no penalty for going in late. The limit on it is the reassessment window for the year concerned: inside the window the adjustment can be considered, outside it the year is closed and no amount of paperwork reopens it. The cost of delay here is therefore the loss of a year rather than a charge, which is arguably worse, because a charge can be paid and a closed year cannot be bought back.
How much is the late filing penalty on the return itself?
For the 2025 tax year the late-filing penalty is 5% of the balance owing at the filing deadline, plus 1% of that balance for each full month the return is late, to a maximum of 12 months. Where the agency had issued a demand to file and had charged a late-filing penalty in any of the three preceding tax years, the rate is 10% plus 2% per full month, to a maximum of 20 months. That charge belongs to the return and to how late the return was, which is why it gets searched alongside a form that has no deadline of its own.
If an adjustment increases my tax, will I be penalised for it?
Keep the two charges apart. The late-filing penalty is measured against the return and how late the return was; there is no separate penalty for filing an adjustment. Interest is the live issue. An adjustment that increases the balance produces an amount that has effectively been outstanding since the original due date, and interest compounds daily on an unpaid balance. So the arithmetic worth doing before filing is not whether a penalty appears, but how long the extra tax will have been outstanding by the time it is assessed, and whether paying it on filing is the cheaper course.
Can Form T1-ADJ remove a penalty the CRA already charged?
No. An adjustment changes figures on a return. It does not cancel a penalty, and a request to cancel or waive penalties and interest is a separate application resting on separate grounds: what happened, when, and why it was beyond the taxpayer's control. Both can be right on the same year, and they are filed separately. Where a client's real complaint is the penalty rather than the figures, starting with an adjustment is a detour. It does not answer the complaint, and it does not extend the time for the application that would.
I left foreign income off for years. Is a late adjustment the fix?
Usually not. Adjustment is the right tool for an error and the wrong tool for unreported foreign income: a disclosure application preserves relief that an ordinary adjustment does not, and the route is decided by what you file first. A series of late adjustments bringing the income in is the most common way that relief gets lost, because by the time the agency responds the choice has already been made. The years, the income and the documents are assembled much the same way for either route. Where they are sent is the decision that matters.
Does interest keep running while my adjustment is processed?
Yes. Interest compounds daily on an unpaid balance, and nothing about an adjustment sitting in a queue pauses it. The late-filing penalty behaves differently: once charged it is a fixed amount and does not compound. So the part of a balance that grows while you wait is the interest, not the penalty. Where an adjustment is going to increase the tax and the client knows roughly by how much, paying that amount when the adjustment goes in stops the compounding on it, and the payment sits on the account to be dealt with either way.
I have not filed for several years while living abroad — what are my options?
Both countries have routes back, and using one before they contact you is what preserves the relief. On the US side there are procedures aimed at taxpayers whose failure was not wilful, including one designed for people living outside the country, and separate procedures for late account reports and information returns alone. Canada has its voluntary disclosures programme and taxpayer relief for penalties and interest. Filing quietly and hoping is the one approach with no protection attached to it. See catch-up filing.
How does the treaty tie-breaker work when both countries say I am resident?
As a sequence, stopping at the first test that gives an answer: where you have a permanent home available; if in both or neither, where your centre of vital interests is; then habitual abode; then nationality; and if all of those tie, the two tax authorities decide by agreement. It is evidential rather than elective — you do not choose your treaty residence, you demonstrate it, which makes the record of homes, family and time the substance of the claim. See tie-breaking dual residency.
