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).
Income Tax Act s. 162(1)
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 CRA web page Interest and the late-filing penalty.
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 rate is 6%, at least until June 30, 2020.
Canada Revenue Agency (CRA) Resources
Payment Arrangements, which talks about what you can do if you cannot pay the balance owing
If you cannot pay in full now - contact CRA right away!
Payment Arrangement Calculator - help with proposed payment arrangement plan to pay off your tax debt
Personal income tax debt collection - includes a payment arrangement calculator
Tax Tip: Always file your tax return on time, even if you can't afford to pay the tax!
Revised: August 27, 2020
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