CRA Compliance & Reporting

CRA Notice of Non-Compliance: New Penalties Explained

By October 20, 2026 No Comments
Important: This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions.

Quick Answer

  1. A CRA Notice of Non-Compliance (NoNC) is a formal notice issued by the Canada Revenue Agency under Bill C-31 when a taxpayer has failed to comply with an information or document request during an audit or review.
  2. The recipient has 90 days to either comply with the underlying request or file a review of the notice.
  3. If the taxpayer does not comply and the CRA later obtains a compliance order from the Federal Court, a penalty of 10% of the tax payable for each year the notice remains outstanding may apply, but only where the tax owing for that year exceeds $50,000.
  4. The NoNC regime applies Canada-wide to individuals, sole proprietors, corporations, and trusts.
  5. Ignoring a NoNC is costly; a timely, documented response is almost always the cheaper path.

Why Canadians are suddenly hearing about Notices of Non-Compliance

A small business owner in Mississauga opens the mail, sees the CRA logo, and feels her stomach drop. The letter is not a reassessment or a familiar audit request. It is something new: a Notice of Non-Compliance, with a 90-day clock printed near the top.

If that scenario sounds unsettling, you are not alone. The NoNC is a tool the Canada Revenue Agency only recently gained under Bill C-31, and it quietly changes the cost of ignoring a CRA information request. Where a missed request used to lead to escalating letters, it can now lead to a Federal Court compliance order and a penalty worth 10% of the tax owing for each year the notice stayed open.

The good news is that the regime is predictable, the timeline is clear, and the right response in the first week usually prevents the worst outcomes. For broader context on how CRA powers have expanded recently, see our overview of the new CRA compliance regulations.

90Days to respond
10%Of tax payable, per year
$50KTax owing threshold
C-31Enabling legislation

Quick start: pick your path

Which type of taxpayer you are changes what the first 48 hours should look like. Find your situation below and read the matching section. Every reader should still read the two sections on how the penalty works and what to do inside the 90-day window.
Salaried individual
You most likely received the notice because of unreported income, a disputed deduction, or missing supporting documents. Focus on the step-by-step section and bring any T-slips or receipts the CRA is asking about.
Sole proprietor
The notice typically relates to business income, expense documentation, or an HST filing gap. Pay close attention to the comparison table so you know whether a Requirement letter or a NoNC is in front of you.
Incorporated SME owner
Your exposure to the 10% penalty is highest here because corporate tax owing can cross the $50,000 threshold quickly. Read the penalty mechanics section first and then move to the response roadmap.
Trustee or executor
The NoNC regime applies to trusts, and the 90-day window is identical. Consult a professional immediately because trustees can carry personal liability for compliance failures.

If you are not sure which path fits, start by browsing more guidance on the ClearWealth Insights blog and then move into the body of this article.

What a Notice of Non-Compliance actually is (and what it is not)

A CRA Notice of Non-Compliance is a formal letter issued under the Income Tax Act when the CRA believes a taxpayer has failed to respond to, or has only partly responded to, an information or document request during an audit, review, or verification. It starts a 90-day clock and creates a path to court-ordered compliance and financial penalties if ignored.

The notice is new under Bill C-31, but it builds on existing CRA audit powers in sections 231.1 and 231.2 of the Income Tax Act. Those sections give the CRA the right to request records, interviews, and other information from any taxpayer or third party. The NoNC is what the CRA may now issue when that request is refused or ignored.

Three things it is not. It is not a Notice of Reassessment, which changes the tax you owe for a given year. It is not a Notice of Objection, which is the formal taxpayer tool for disputing a reassessment. And it is not an audit itself; it is a consequence of not cooperating with one. For a wider overview of how CRA audits unfold, see our guide to surviving a CRA audit.

ClearWealth Accounting Advisors
The 90-Day NoNC Timeline
What happens on each key day after a CRA Notice of Non-Compliance is issued
Response Window
90 days
Penalty Rate
10% per year
Threshold
> $50,000
Source: Canada Revenue Agency (canada.ca) · Bill C-31 technical notes. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

Notice of Non-Compliance vs other CRA notices: a side-by-side view

CRA correspondence can feel interchangeable until you compare the notices side by side. Knowing which type of letter you are holding changes the deadline that matters, the risk you face, and the kind of help you need.

The Notice of Non-Compliance sits between a Requirement letter (the formal request for information) and a Compliance Order (the Federal Court order that activates the 10% penalty). Treating all three as the same type of letter is a common and expensive mistake. If your file involves disagreement with a reassessment rather than a compliance request, see our walkthrough on filing a Notice of Objection.

ClearWealth Accounting Advisors
CRA Notices Side-by-Side
How the Notice of Non-Compliance differs from other CRA correspondence
Notice type What triggers it Response window Penalty exposure Appeal route
Notice of Non-ComplianceFailure to comply with a CRA information request90 days10% of tax owing per year, if compliance order grantedReview within 90 days
Notice of ReassessmentCRA changes the tax owing after a return has been filed90 days to file objectionAdditional tax, interest, possible gross-negligence penaltyNotice of Objection
Requirement to Provide InformationFormal CRA demand for records or informationSet out in the letter, often 30 daysRisk of escalation to NoNC or court applicationLimited – mostly judicial review
Compliance OrderFederal Court order sought after NoNC is ignoredSet by the CourtActivates the 10% penalty per year outstandingFederal Court of Appeal
Source: Canada Revenue Agency (canada.ca) · Income Tax Act, sections 231.1, 231.2, 231.7. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

The new penalties: how the 10% charge is calculated

If the CRA obtains a compliance order from the Federal Court after a Notice of Non-Compliance is ignored, a penalty of 10% of the tax payable may apply for each year the notice remains outstanding. The penalty is only triggered where the tax owing for that year exceeds $50,000, and it stacks for every year the taxpayer stays non-compliant.

The mechanics are easier to follow with a working example. Imagine an incorporated contractor who owes $200,000 of corporate tax for the 2024 tax year and does not respond to the CRA document request. After the 90-day NoNC window closes, the CRA applies to the Federal Court for a compliance order. If the order is granted and non-compliance has stretched across two tax years, the penalty exposure may reach 10% of the tax owing per year, which can produce a figure in the tens of thousands of dollars on top of the original tax.

Three features of this penalty matter most. It applies per year, not once; it does not apply if your tax owing for the year is $50,000 or less; and it comes on top of any other penalties the CRA may assess, such as late-filing penalties on T4 and T5 information returns. The intent of Bill C-31 is to make non-cooperation more expensive than cooperation.

ClearWealth Accounting Advisors
How the 10% Penalty Scales with Tax Owing
Compliance order penalty exposure per year the notice remains outstanding
Below Threshold
$0 penalty
Tax owing ≤ $50,000
Example Mid-Range
$25,000
Tax owing $250,000
Stacks Per Year
Yes
Per outstanding tax year
Source: Canada Revenue Agency and Department of Finance (canada.ca) · Illustrative examples. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

Step-by-step: what to do in the 90 days after you receive a NoNC

A Notice of Non-Compliance is intimidating, but the response path is reasonably clear. Working through the steps below in order typically produces the best outcome and the lowest cost.

  1. 1
    Confirm the notice is genuineVerify the CRA sender details, cross-check against your CRA My Business Account or My Account, and never provide personal information in response to a phone call or email until you have logged in and confirmed the file exists.
  2. 2
    Log the dates immediatelyMark the date of issue, the Day 90 deadline, and intermediate check-in dates in two places (calendar plus a working file). The 90-day window is strict.
  3. 3
    Read the underlying information request carefullyThe NoNC is tied to a specific earlier request from the CRA; locate it, re-read it, and list exactly what is being asked for.
  4. 4
    Gather the records being requestedPull invoices, bank statements, contracts, HST filings, payroll records, or whatever the CRA has listed. Partial compliance is usually better than silence, but complete compliance is best.
  5. 5
    Decide between complying and challenging the noticeMost taxpayers should comply. If you believe the notice is factually wrong or the request is unreasonable, you can file for review within the 90-day window.
  6. 6
    Engage a qualified accountant before you respondAn accountant can shape your response, identify any protected information, and communicate with the CRA on your behalf under authorization.
  7. 7
    Document every exchangeKeep copies of every submission, every CRA reply, and every phone log. If the matter later escalates to Federal Court, this record becomes essential evidence.
ClearWealth Accounting Advisors
CRA Audit Activity by Taxpayer Segment
Approximate share of CRA audit and review activity directed at each taxpayer segment
SME Share
~45%
Individual Filers
~30%
Large Corporate
~18%
Source: CRA Departmental Results Report (canada.ca). Illustrative placeholder percentages – refresh with current CRA data before publication. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

Can voluntary disclosure help if you expect a NoNC?

Sometimes a taxpayer sees a NoNC coming because they already know a return is incomplete or that income was not fully reported. In those cases, acting first through the CRA Voluntary Disclosures Program (VDP) can be far cheaper than waiting.

The VDP is a CRA relief program that allows taxpayers to proactively correct past tax filings and, if the application is accepted, receive relief from penalties and partial relief from interest. Importantly, the VDP generally cannot be used once the CRA has already contacted you about the issue, which is why the window often closes the moment a Requirement letter or NoNC arrives. Our deep-dive on the Voluntary Disclosures Program covers eligibility in detail.

Common mistakes taxpayers make with a Notice of Non-Compliance

Most of the cost from a NoNC comes from avoidable missteps in the first few weeks, not from the underlying tax issue. The patterns below show up in our files consistently.

  • →Assuming the notice is a scam and discarding it. Scam letters imitate CRA formatting, so a real NoNC often gets filed with the junk mail. Always verify through your CRA online account before deciding a letter is fake.
  • →Missing the 90-day window by a few days. The clock does not pause for holidays, vacations, or illness, and reinstatement after Day 90 is rare.
  • →Partial compliance that leaves the main request unanswered. Sending some documents but not the ones the CRA asked for is treated as non-compliance.
  • →Attempting a DIY response to a Federal Court application. Once the CRA moves for a compliance order, you need professional representation.
  • →Destroying records to avoid producing them. This creates separate and typically more serious penalties under the Income Tax Act, and in some cases criminal exposure.
  • →Ignoring the CRA follow-up questions after you submit documents. The 90-day clock may be met, but the file stays open until the CRA closes it in writing. For a wider view, see our list of CRA audit mistakes small businesses make.

Frequently asked questions

The questions below are the ones Canadian taxpayers ask most often after receiving a Notice of Non-Compliance. Each answer is written to stand on its own. Our full CRA audit checklist provides deeper practical steps.

What is a CRA Notice of Non-Compliance in plain language?

A CRA Notice of Non-Compliance is a formal letter the Canada Revenue Agency sends when a taxpayer has failed to respond to an earlier information or document request. It gives the taxpayer 90 days to comply or seek a review, and it opens the door to a Federal Court compliance order and a 10% penalty if ignored.

How long do I have to respond to a CRA Notice of Non-Compliance?

You generally have 90 days from the date the notice is issued. The window does not pause for weekends or holidays, and extensions are rarely granted, so your response should be well under way within the first two weeks.

How is the 10% CRA compliance order penalty actually calculated?

The penalty is equal to 10% of the tax payable for each tax year the notice remains outstanding, and it is only triggered after the CRA obtains a Federal Court compliance order. It applies on a per-year basis, so a multi-year non-compliance can produce a stacked penalty.

Does the Notice of Non-Compliance apply to me if my tax owing is under $50,000?

The 10% compliance order penalty only applies where the tax owing for the year exceeds $50,000. The notice itself still applies to you, and ignoring it can still cause the CRA to escalate to court, so the 90-day window should always be taken seriously.

Can I appeal a Notice of Non-Compliance?

Yes. You can request a review of the notice within the 90-day window, and if the review goes against you, further appeal routes may be available. A qualified accountant or tax professional should guide the appeal strategy because the paperwork is strict.

What is the difference between a Notice of Non-Compliance and a Notice of Reassessment?

A Notice of Reassessment changes the amount of tax you owe for a specific year. A Notice of Non-Compliance does not change your tax owing; it penalizes the failure to cooperate with a CRA information request, and the two can arrive in the same file.

Will the CRA take me to court if I ignore a Notice of Non-Compliance?

The CRA has the statutory authority to apply to the Federal Court for a compliance order after the 90-day window closes. Not every file escalates, but ignoring the notice makes a court application more likely, which in turn activates the 10% penalty.

Can an accountant respond to a CRA Notice of Non-Compliance on my behalf?

Yes. Once you authorize an accountant through the CRA authorization process, they can correspond directly with the CRA, submit documents, and manage the response timeline. Engaging a professional early typically produces a stronger and faster response.

Dealing with a CRA notice? Get the first 48 hours right.

ClearWealth Accounting Advisors represents individuals, sole proprietors, and incorporated businesses across Ontario in CRA disputes and audits, with deep experience in voluntary disclosures and compliance order responses. Book a confidential consultation to walk through your notice, your options, and your 90-day plan.

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This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions. Rates, thresholds and deadlines are based on information available at the time of publication and may change; verify current figures against the CRA website before acting.

Sources & References