Skip to main content

Can not Pay Taxes Canada 2026 | Your Options

Updated

What to Do If You Cannot Pay

Immediate Steps

Step Action
1 File your return on time (avoid late filing penalty)
2 Pay whatever you can
3 Set up payment plan
4 Consider relief options

Why Filing Matters

If You… Consequence
File on time, can’t pay Interest only
File late, can’t pay Interest + 5% penalty + 1%/month
Don’t file at all All penalties + possible prosecution

CRA Interest and Penalties

Current Rates (2025-2026)

Charge Rate
Interest ~10% annually (compounds daily)
Late filing penalty 5% + 1%/month (up to 12 months)
Repeated late filing 10% + 2%/month

Cost of Waiting

Amount Owed 6 Months Interest 1 Year Interest
$5,000 ~$250 ~$500
$10,000 ~$500 ~$1,000
$25,000 ~$1,250 ~$2,500
$50,000 ~$2,500 ~$5,000

Payment Plan Options

How to Set Up

Method Process
My Account Online, automatic approval for some
Phone 1-888-863-8657
In person Tax services office

What CRA Considers

Factor Impact
Amount owed Determines plan length
Income What you can afford
Payment history Past compliance
Assets Ability to pay

Typical Payment Terms

Amount Typical Term
Under $10,000 6-12 months
$10,000-$25,000 12-24 months
Over $25,000 Negotiated, may be longer

What to Expect

Requirement Details
Minimum payment Usually required
Regular payments Monthly, pre-authorized
Interest continues On balance
File future returns On time

Collection Actions

What CRA Can Do

Action Timing
Letters/calls First attempts
Garnishment (wages) After notices
Bank account freeze After notices
Property liens For large debts
Asset seizure Last resort

How to Avoid Collections

Strategy How
Communicate Respond to CRA
Payment plan Show good faith
Pay something Any amount helps
Keep filing Don’t compound problems

Taxpayer Relief Program

What Can Be Relieved

Type Possible Relief
Interest ✅ Yes, extraordinary circumstances
Penalties ✅ Yes, extraordinary circumstances
Tax owed ❌ No, almost never

Qualifying Circumstances

Situation Example
Financial hardship Job loss, illness
Extraordinary event Disaster, family crisis
CRA error/delay They caused problem
Circumstances beyond control Documented hardship

How to Apply

Step Action
1 Complete Form RC4288
2 Explain circumstances
3 Provide documentation
4 Submit to tax centre
5 Wait for decision (months)

What to Include

Document Purpose
Written explanation What happened
Medical records If health-related
Employment records If job-related
Financial statements Show hardship
Timeline When issues occurred

Bankruptcy and Taxes

When Tax Debt Can Be Discharged

Tax Debt Age Dischargeable?
Under 3 years old ❌ No
Over 3 years old ✅ Yes
Fraud-related ❌ Never

Consumer Proposal

Feature Details
What it is Negotiate to pay portion
CRA must agree Creditor vote
Stays collection While proposal active
Credit impact 3 years after completion

Bankruptcy

Feature Details
Discharge Tax debt over 3 years old
Process 9-21+ months
Cost Trustee fees
Impact 6-7 years on credit

Paying Your Tax Bill

Ways to Pay

Method Notes
Online banking From your bank
CRA My Account Direct payment
Pre-authorized debit Automatic payments
Mail cheque Slow, keep proof
In person At bank or post office
Credit card Through third party (fees)

Prioritizing Debt

Debt Type Priority
CRA tax debt High (collection powers)
Secured debt High (can lose asset)
Unsecured debt Lower
Credit cards Can negotiate

What NOT to Do

Mistake Why It’s Bad
Ignore CRA letters Escalates to collections
Not filing returns Adds penalties
Hiding income Fraud charges possible
Not communicating Lose negotiation chance
Panic decisions Scams target tax debtors

Getting Help

Free Resources

Resource Service
CRA helpline General questions
Community tax clinics Low-income tax prep
Legal aid Some tax issues
Professional When to Use
Accountant Representation, planning
Tax lawyer Legal issues, large amounts
Licensed insolvency trustee Bankruptcy/proposal