CRA demand to file letter: What it means and what to do next.

Few pieces of mail create more stress than a letter from the Canada Revenue Agency (CRA), especially when it includes the word "demand." While it can feel alarming, a demand to file letter is often the CRA's way of following up on a missing tax return or requesting information about your taxes.

The key is not to ignore it. Once a formal demand to file has been issued, you're required to respond by the deadline.

Here's what you need to know and what to do next.

Key takeaways:

• A CRA demand letter is a formal request that requires your attention, but it doesn’t automatically mean you’re being audited or have done something wrong.
• Read the letter carefully, confirm what the CRA needs, and respond by the stated deadline, even if you need to contact the CRA for more time or help.
• Ignoring the letter can lead to penalties, interest, a CRA assessment, collection action, or, in serious cases, prosecution.

Table of contents:
•    What’s a CRA demand letter?
•    Why did I receive a CRA demand letter?
•    Types of CRA letters and information requests.
•    What should you do if you receive one?
•    What happens if you ignore a CRA demand letter?
•    Can you dispute a CRA demand letter?
•    Frequently asked questions.
•    How H&R Block can help.

What’s a CRA demand letter?
A CRA demand to file letter is a formal notice requiring you to file a missing tax return by a stated deadline. The CRA may send reminders or try to contact you first, but once it issues a formal demand, you’re legally required to respond.

Why did I receive a demand to file letter?
There are a few reasons why the CRA may send you a demand to file letter.

1. You haven't filed a tax return.
A missing return is the most common reason the CRA sends a demand to file. Because the CRA receives copies of slips such as T4s, T5s, and T3s, it may know that you earned income even when it hasn’t received your return. If its records suggest you may owe tax, it may send a formal demand asking you to file.

2. Information reported to the CRA doesn't match its records.
The CRA receives information from employers, financial institutions, investment firms, and other organizations.

If that information doesn't align with what's reported on your tax return, the CRA may contact you for clarification or supporting documents.

3. You're self-employed or have more complex sources of income.
If you're self-employed or earn income from sources such as rental properties, investments, or business activities, the CRA may need additional information to verify your tax situation.

4. Previous CRA requests weren't answered.
In some cases, the CRA may issue a formal demand after earlier requests or reminders haven't received a response.

Types of CRA letters and information requests.
The CRA sends different types of notices depending on what information it needs and where you are in the compliance process.

Demand to file a tax return.
This formal notice applies when one or more tax returns are missing. Under the CRA’s Non-Filer Program compliance process, you’re legally required to file the requested return or returns. Check out the CRA’s unfiled tax returns page for more information.

Request for supporting documents.
If you’ve already filed your return, the CRA may ask for receipts, invoices, or other records that support a claim, deduction, credit, or benefit.

Request for business records.
If you're self-employed or own a business, the CRA may ask to review records relating to income, expenses, bookkeeping, or accounting activities.

Requests related to benefits, credits, or deductions.
They may also ask for additional information to confirm your eligibility for a benefit, credit, or deduction you've claimed.

Need help responding to a CRA demand letter?
If you're unsure what the CRA is asking for, missing tax records, or dealing with multiple outstanding tax years, an H&R Block Tax Expert can help you understand your notice, prepare any required returns, gather supporting documents, and respond with confidence.

Find an H&R Block Tax Expert near you or book an appointment to discuss your situation.

What should you do if you receive a CRA demand letter?
Two things matter most: don’t ignore the letter, and don’t assume the worst. Here are the steps you can take to understand the request and respond.

1. Read the letter carefully.

Start by reading the entire letter from start to finish.

Pay attention to:
•    What tax year is involved.
•    What information is being requested.
•    Any deadlines provided.
•    Contact information included in the letter.
•    Reference or case numbers.

Once you know the tax year, deadline, and requested information, you can decide what to gather and whether you need help responding.

2. Verify that the letter is legitimate.

Unfortunately, tax scams are common.

If you're unsure whether a letter is genuine:
•    Sign in to CRA My Account.
•    Check your online correspondence.
•    Contact the CRA using official contact information.

Never use phone numbers or links that seem suspicious.

3. Gather your documents.

Collect any information related to the request.

This may include:
•    T-slips
•    Receipts
•    Prior returns
•    Bank records
•    Business records
•    Supporting tax documents

Focus on the records connected to the tax year and request in the letter. This can help you respond accurately without spending time gathering documents the CRA didn’t ask for.
 

4. Respond before the deadline.

Even if you're missing information, don't let the deadline pass without taking action. If you need more time, contact the CRA to discuss your situation. Showing you're making a genuine effort to comply is almost always better than remaining silent.

5. Get help if you need it.

Tax matters can quickly become overwhelming, especially if multiple tax years are involved.

A tax professional can help you:
•    Determine what's missing.
•    Prepare outstanding returns.
•    Gather supporting documentation.
•    Respond to CRA requests.
•    Communicate with the CRA on your behalf.

What happens if you ignore a CRA demand letter?
Tax paperwork is easy to put off, especially when you’re unsure what the letter means. But leaving a CRA demand unanswered can make the issue harder, and potentially more expensive, to resolve.

If the letter goes unanswered, the CRA may charge penalties and interest, assess the return using the information it has available, take steps to collect an unpaid balance, or pursue legal action in serious cases.

Penalties and interest.

If you owe tax and file late, the CRA may charge a late-filing penalty, along with interest on the unpaid balance.

For most individuals, the late-filing penalty is 5% of the balance owing, plus 1% of the unpaid amount for each full month the return is late, up to 12 months. If the CRA has charged you a late-filing penalty in a previous year, the penalty may be higher.
 

CRA assessments.

If a return remains unfiled, the CRA may assess what it believes you owe using the information already on file.

Because the CRA may not have details about all your deductions, credits, or expenses, its assessment may be higher than your actual tax bill. Filing the missing return allows your full tax situation to be considered.
 

Collection actions.

If you have an unpaid tax balance, the CRA may apply tax refunds or certain government payments to the debt. Depending on the circumstances, it may also garnish wages or bank accounts, register a lien against property, or seize and sell assets.

These actions generally don’t happen right away. The CRA will usually contact you and provide a legal warning first. If you can't pay the full amount, contact the CRA as soon as possible to discuss a payment arrangement.
 

Potential legal consequences.

In serious cases, the CRA may refer continued non-compliance for prosecution. A person convicted of failing to file a required return may face a fine of $1,000 to $25,000, and the court may also impose a jail term of up to 12 months. These consequences are separate from any tax, interest, or other penalties owing.

Prosecution isn’t the usual outcome, but a formal demand should still be taken seriously. Responding by the deadline, or contacting the CRA if you need help, can prevent the issue from escalating.

Can you dispute a CRA demand letter?

Sometimes, yes.

You may want to contact the CRA if:
•    You've already filed the tax return they’re asking for.
•    The CRA doesn't have all the information about your situation.
•    The letter is for a tax year that doesn't apply to you.
•    You've already sent the documents the CRA is requesting.

If you think the CRA made a mistake, contact them as soon as possible. Be sure to gather any records or documents that support your case.

As a taxpayer, you have rights. If you don't agree with a CRA decision, you may be able to ask for a review or file an appeal.

Frequently asked questions.

How H&R Block can help.

Getting a letter from the CRA can feel overwhelming. Whether you’ve received a demand to file, a request for documents, or another CRA notice, H&R Block Tax Experts can help you review the notice, identify what's missing, prepare outstanding returns, gather supporting documents, and respond appropriately to the CRA. If you're dealing with multiple tax years or a more complex situation, we'll help you work through it step by step.
 

The sooner you address a CRA notice, the more time you'll have to gather information, explore your options, and resolve the issue. 
 

Received a CRA demand letter or notice? Book an appointment with an H&R Block Tax Expert. We’ll help you understand what the CRA is asking for, identify what you may need to file or provide, and determine the next step.