Home  ->  Filing Your Return -> Can't Pay the Tax Owed

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.  Then, contact Canada Revenue Agency (CRA) regarding payment (see link below).

Late-Filing Penalty

Income Tax Act s. 162(1), (2)

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. You'll be charged 10% of the balance owing, plus 2% of the balance owing for each full month that your return is late, to a maximum of 20 months.  For more information, see the CRA web page Interest and the late-filing penalty.

Tax Tip:  File your tax return on time to avoid penalties!

Interest on Overdue Balance Owing

Income Tax Act s. 161(1)

After you file your tax return, you will be sent an assessment notice from CRA which shows the balance of tax owing.  After the payment deadline of April 30th, interest will accrue on this balance at the CRA prescribed rate of interest, compounded daily.  The current interest rates can change quarterly, and can be found on the CRA prescribed interest rates page.  The current rate is 9%, for April 1 to June 30, 2023.

TaxTips.ca Resources

Making Payments to Canada Revenue Agency

Taxpayer Relief Provisions (Fairness provisions)

Can CRA Withhold My Benefits or Garnish My Wages?

Canada Revenue Agency (CRA) Resources

Interest and the late-filing penalty

Prescribed interest rates

Payment Arrangements, which talks about what you can do if you cannot pay the balance owing

Unable to pay for individuals - contact CRA right away!

Personal income tax debt collection - includes a payment arrangement calculator

Tax Tips:

Always file your tax return on time, even if you can't afford to pay the tax!

Contact CRA right away if you can't pay your balance owing!

Revised: April 30, 2023

Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved.  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  See What’s New, stay connected with TaxTips.ca by RSS or Email
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.