What if I can't afford to pay the tax
I owe?
Even if you can't afford to pay the income tax that you owe, you should
file your tax return by the annual deadline in order to avoid any late-filing
penalties. The late filing penalty is 5% of the balance owing, plus
1% of the balance owing for each full month that your return is late, to a
maximum of 12 months (that would be a total penalty of 17% of the balance
owing). If you have incurred late-filing penalties in any of the three
preceding taxation years, your late filing penalties are doubled. For more
information, see the Canada Revenue Agency (CRA) web page Interest
and the late-filing penalty.
After you file your tax return, you will be sent an assessment notice from
Canada Revenue Agency (CRA)
which shows the balance of tax owing. After the payment deadline,
interest will accrue on this balance at the CRA prescribed rate of interest, compounded
daily. See the CRA information circular IC98-1R3
Collections Policies. The current interest rates can be found on the CRA prescribed
interest rates page. You can
communicate with CRA to set up a payment schedule for the taxes owing.
Tax tip:
Always file your tax return on time, even if you can't afford to pay the tax!
Revised: July 19, 2010
