The CRA filed a return for you — undoing an arbitrary assessment

An assessment arrives for a year you never filed, and the number is enormous. This is an arbitrary assessment — also called a notional assessment — and the good news is that it is an estimate, not a verdict. The bad news is that it is fully collectible until you replace it.

How the CRA can assess a return you never filed

The Non-Filer Program identifies taxpayers who were required to file and did not, where there are potential taxes owing. The escalation is deliberate: a letter or notice asking you to file, phone contact from an officer with a deadline, and, if contact fails, a visit to a home or place of business. If the returns still do not come in, the CRA can raise an assessment under subsection 152(7) of the Income Tax Act — assessing tax without a return in hand.

Once the CRA has asked you to file, you are legally required to file under subsection 150(2) of the Act. At that point “I did not get around to it” stops being an administrative problem and becomes a compliance one. The CRA can also pursue prosecution in the right circumstances.

Why the number is so high

An arbitrary assessment is built from what the CRA can see, and the CRA can see income far more easily than it can see expenses. Slips filed by employers, payers and financial institutions are in the system. Your subcontractor invoices, materials, vehicle costs and home office are not. Deductions depend on facts the CRA does not have access to, so they are largely left out. Where business expenses are estimated at all, previous filings are used as the guideline.

The result is a return that looks like gross income with very little taken off it. That is the arithmetic behind the scary number — not a penalty, just a missing side of the ledger.

How to undo it

There is one real remedy, and it is not an argument.

1. File the actual return. A properly prepared return, with the deductions you are entitled to and the records to back them, replaces the CRA’s estimate. This is the whole game.
2. File every outstanding year, not just the assessed one. Unfiled years keep the file open, keep penalties accruing and block most payment options.
3. Rebuild the books before filing. A return filed on guesses invites a review of its own. If the records are behind, that is a catch-up bookkeeping job first.
4. Deal with the balance. Whatever survives after the real return is assessed is a debt, and it is already in collections. See what happens in CRA collections.

Before the CRA contacts you

If years are outstanding and the CRA has not yet been in touch, the Voluntary Disclosures Program may reduce penalties for taxpayers who come forward on their own. That door narrows once the agency has already started asking, which is the single strongest reason to act early rather than wait for the letter. Our guide to the Voluntary Disclosures Program covers how it works.

Corporations are not exempt

The Non-Filer Program covers individuals, corporations and trusts. An incorporated business that stops filing T2s can be assessed the same way, on top of the late-filing penalties that already apply to a corporate return. Those are set out in T2 deadlines and late-filing penalties.

The bottom line

An arbitrary assessment is the CRA’s estimate in the absence of your return, and it is an estimate made without your expenses. It is also a real, enforceable debt while it stands. The fix is to file — properly, for every open year, with records behind it. Getting current is what we do in our tax services.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique — please speak with a CPA before acting on anything here.