CRA $1,000 Penalty for Not Filing Your T2 Return Electronically

If your corporation is required to file its T2 Corporation Income Tax Return electronically but files another way, the Canada Revenue Agency (CRA) can charge a $1,000 penalty for non-compliance with mandatory electronic filing.
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This penalty can apply even if your corporate tax return is otherwise completed and filed.
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If you're looking to prepare and file your corporate tax return yourself, you can file your T2 return online with CloudTax T2 Basic, a CRA-certified DIY T2 tax filing solution.
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The CRA states that a corporation that is required to file its T2 return electronically but does not comply with the electronic filing requirement will be charged a $1,000 penalty.
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The penalty is provided under subsection 162(7.2) of the Income Tax Act.

In other words, there are two separate questions to consider:

Filing the return does not necessarily avoid the penalty if it was submitted using a method that does not meet the CRA's mandatory electronic filing requirement.
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Generally, yes.
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The CRA states that corporations must file their T2 returns electronically, with limited exceptions.
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Exceptions currently include:

For many Canadian small businesses and Canadian-controlled private corporations (CCPCs), electronic T2 filing is therefore mandatory.
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The CRA specifically notes that CCPCs must file their returns electronically and may be charged a penalty if they do not comply.
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Not sure whether your corporation needs to file a corporate return in the first place?

Read our guide on Who Needs to File a T2 Return in Canada.

This is where business owners need to be careful.

The CRA explains that if you cannot file electronically, you can print a T2 Bar Code Return and mail it to the CRA. However, if your corporation is subject to mandatory electronic filing, filing the paper T2 Bar Code Return does not avoid the electronic filing penalty.

The CRA states that taxpayers in this situation will be charged the mandatory electronic filing penalty.

So, if your corporation is required to electronically file its T2 return, mailing a paper return instead can result in the $1,000 penalty.

No.

The $1,000 mandatory electronic filing penalty relates to how a corporation files its T2 return.

The late-filing penalty relates to when the corporation files its return.

A T2 return is generally due within six months after the end of the corporation's tax year.

If a corporation files late and has unpaid tax owing, the CRA can also assess a late-filing penalty. This means corporations should pay attention to both the filing deadline and the required filing method.

Having no income or tax payable generally does not remove the requirement to file a T2 return.

Canadian resident corporations generally have to file a T2 return every tax year, including corporations that:

There are limited exceptions.

If you recently incorporated a company or have an inactive corporation, see our detailed guide on Who Needs to File a T2 Return in Canada.

The CRA requires the use of CRA-certified tax preparation software for Corporation Internet Filing.

Depending on your situation, you can prepare and electronically file the T2 yourself using certified software or have a tax professional prepare and file the return for you.

CloudTax offers different options depending on how much assistance you need. You can learn more in our guide to T2 filing options in Canada.

If you're preparing the corporate return yourself, our T2 Software Help Centre also includes guides covering T2 preparation, filing requirements and common corporate tax questions.

Suppose you own a small incorporated business in Ontario.

Your corporation is a CCPC and is required to electronically file its T2 return. You complete the corporate return before the filing deadline but mail the T2 Bar Code Return to the CRA instead of filing electronically.

Even though the return was submitted, the corporation did not comply with the mandatory electronic filing requirement.

The CRA can therefore charge the corporation the $1,000 mandatory electronic filing penalty.

The issue is not necessarily whether the return was prepared correctly or received on time. The issue is that the corporation was required to file electronically.

The CRA can charge a $1,000 penalty when a corporation that is required to electronically file its T2 return fails to comply with the electronic filing requirement.

Some corporations are exempt from mandatory electronic filing. However, if your corporation is required to file electronically, mailing a T2 Bar Code Return does not satisfy that requirement and can result in the $1,000 penalty.

If your small business operates through a corporation, it will generally be required to electronically file its T2 return unless it falls within one of the CRA's exceptions. The CRA specifically states that CCPCs must file electronically.

An inactive Canadian resident corporation generally still has to file a T2 return. If it is subject to the mandatory electronic filing rules, the electronic filing requirement can still apply even though the corporation had no business activity.

Yes. A business owner can prepare and electronically file their own T2 return using CRA-certified corporate tax software, provided the corporation and return are eligible for electronic filing.

If your corporation is required to electronically file its T2 return, filing it another way can result in a $1,000 CRA penalty.

For most Canadian corporations, including CCPCs, electronic filing is now the standard requirement.

Before filing, make sure you understand:

You can explore the CloudTax T2 Software Help Centre for more information about preparing and filing your corporate tax return.

Official CRA source: T2 Corporation Income Tax Guide: Before You Start

This article provides general information and is not intended as tax or legal advice. Corporate tax filing requirements can vary depending on the corporation's circumstances.