Most taxpayers sit down to do their annual tax return (or wait to hear from their tax return preparer) with some degree of anxiety. In most cases taxpayers don’t know, until their return is completed, what the “bottom line” will be, and it’s usually a case of hoping for the best and fearing the worst.
Most taxpayers are, of course, hoping for a refund – the bigger the better. And for most taxpayers, that hope is realized. Of the approximately 5.5 million tax returns filed with the Canada Revenue Agency (CRA) between mid-February and March 17 of 2025, 67% resulted in the payment of a refund to the taxpayer (with an average refund of $2,000), while only 13% resulted in a tax amount owed. (The remaining 20% were nil returns, resulting in neither a refund nor a tax balance owed.) However, while only a small percentage of returns result in a tax balance owed to the government, that’s not much consolation to the 13% of tax filers who find themselves in that situation.
The worst-case scenario, for all taxpayers, is to find out that they are faced with a large tax bill and an imminent payment deadline, and that they just don’t have the funds needed to make the required payment by that deadline. This year, that payment deadline is Wednesday April 30, 2025 for ALL individual taxpayers (including self-employed taxpayers and their spouses who have until Monday June 16, 2025 to file their returns, and individual taxpayers who are reporting capital gains or capital losses for the 2024 tax year, who will not be assessed late-filing penalties or interest provided their returns for 2024 are filed on or before Monday June 2, 2025).
The April 30 payment deadline is inflexible and, where payment in full is not made on or before that date, interest charges on any unpaid balance will be levied by the CRA beginning on May 1, 2025. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates – the rate charged from April 1 to June 30, 2025 is 8.0%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing – for example, through a line of credit or low-interest credit card – in order to pay any taxes owing by the April 30, 2025 deadline.
Where the taxpayer can’t pay their tax bill out of current resources and is unable to borrow the funds to do so, there is another option. Like most creditors, the CRA would rather get paid on time and in full, but the Agency’s ultimate goal is to collect the full amount of taxes owed. If a tax bill can’t be paid on time, in full or in part, the Canada Revenue Agency is open to making a payment arrangement with the taxpayer, providing them with the option of paying an amount owed over time, plus interest.
There are two avenues available to taxpayers who want to propose such a payment arrangement. The first is a call to the CRA’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide their full name and address, social insurance number, and date of birth and to have the Notice of Assessment for the last tax return for which the taxpayer filed. For taxpayers who are up to date on their tax filings, that will be the Notice of Assessment for the return for the 2023 tax year. The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m., Eastern time.
Taxpayers who would rather speak directly to a CRA employee can call the Agency’s debt management call centre at 1-888-863-8657 from 7 a.m. to 8 p.m. Eastern Time Monday to Friday. Where there is a long wait time, the taxpayer can request that a CRA representative return the call, or can complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.
Taxpayers who have registered for the CRA’s online service My Account can also log into their account to schedule a series of pre-authorized debits from their bank account which will discharge their tax debt. My Account is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services.html.
Finally, regardless of the taxpayer’s circumstances, there is one strategy which is in all circumstances the wrong choice. Taxpayers who can’t pay their tax bill by the deadline sometimes conclude that there is no point in filing if payment can’t be made. That’s the wrong decision, and potentially a very costly one. Where an amount of tax is owed and the return isn’t filed on time, there is an immediate tax penalty imposed of 5% of the outstanding tax amount – and interest charges start accruing on that penalty amount (as well as on the outstanding tax balance) immediately. For each full month that the return isn’t filed, a further penalty of 1% of the outstanding tax amount is charged, to a maximum of 12 months. Higher penalty amounts are charged, for a longer period, where the taxpayer has incurred a late-filing penalty within the past three years. In the worst-case scenario, the total penalty charges can reach 50% of the tax amount owed – and that doesn’t count the compound interest which is levied on all penalty amounts, as well as on all unpaid taxes. In all cases, no matter what the circumstances, the right answer is to file one’s tax return on time and, where necessary, contact the CRA to make an arrangement to pay tax amounts owed over time.
Detailed information on the options available to taxpayers who can’t pay their taxes on time and in full can be found on the CRA website at Call us if you can't pay in full or on time - Debt collection at the CRA - Canada.ca and https://www.canada.ca/en/revenue-agency/services/payments-cra/payment-arrangements.html.