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How to Request a CRA Payment Plan for Taxes Owing (2026)

Updated

When to Request a Payment Plan

Situation Recommendation
Can pay in full Pay by deadline to avoid interest
Can pay within 3-6 months Set up payment plan
Can pay over 1-2 years Set up payment plan with regular payments
Can pay small amounts only Contact CRA, explain hardship
Absolutely cannot pay anything Apply for Taxpayer Relief, still call CRA

CRA Payment Arrangement Options

Method Best For
Pay in full Avoid all interest
Pre-authorized debit (PAD) Regular automatic payments
Full amount by future date If you need a few extra weeks
Partial payments over time Standard payment plan

How to Set Up a Payment Plan

Option 1: My Account (Online)

Step Action
1 Log in to CRA My Account
2 Go to “Accounts and Payments”
3 Select “Arrange to pay my personal taxes”
4 Propose payment amounts and dates
5 Submit and receive confirmation

Note: Not all accounts can set up arrangements online. You may need to call.

Option 2: Phone

Step Action
1 Call CRA at 1-888-863-8657
2 Explain you need a payment arrangement
3 Be prepared to disclose income and expenses
4 Propose realistic payment amounts
5 Get confirmation in writing

Option 3: Pre-Authorized Debit

Step Action
1 Complete Form PAD Agreement (CRA website)
2 Specify payment amount and frequency
3 Provide banking information
4 Submit to CRA
5 Payments withdrawn automatically

Information CRA May Ask For

Category Details
Employment income Monthly salary/wages
Other income Rental, investment, etc.
Monthly expenses Housing, utilities, food, transportation
Assets Savings, property, vehicles
Other debts Loans, credit cards
Dependants Family members you support

Sample Payment Plan Proposal

| Total Owed | $12,000 | | Proposed monthly payment | $600 | | Payment duration | 20 months | | Interest (approximate) | $1,200 additional | | Total repaid | ~$13,200 |

Interest and Penalties

Interest Rates

Type Rate (2025)
Prescribed interest rate ~9-10% annually
Compounding Daily
Rate changes Quarterly (can go up or down)

Example Interest Calculation

Scenario Amount
Amount owed $10,000
Payment plan duration 12 months
Average balance ~$5,000
Approximate interest cost $450-500

Penalties (if not filed on time)

Penalty Amount
Late filing penalty 5% of balance owing
Additional per month 1% per month (up to 12 months)
Maximum penalty 17%
Repeated late filer Higher penalties

Reducing Interest and Penalties

Taxpayer Relief Provisions

Can Request Relief For How
Penalties Form RC4288
Interest Form RC4288
Grounds Extraordinary circumstances, CRA delays, inability to pay
Timeline Decisions take months

Note: Relief is discretionary β€” CRA may deny your request.

What If You Can’t Keep Up with Payments?

Situation Action
Temporary hardship Call CRA immediately, request modification
Long-term hardship May need to renegotiate
Income tax return refund CRA will apply it to your debt automatically
Completely unable to pay Consider insolvency options (last resort)

What CRA Can Do If You Don’t Pay

Collection Action Timeline
Send letters Immediately and ongoing
Garnish wages After assessment, notice to employer
Freeze bank accounts Without warning
Register liens on property On real estate you own
Seize and sell assets Vehicles, investments, etc.
Legal action Court judgments

Important: CRA has strong collection powers. Its better to communicate proactively.

Tips for Successful Payment Arrangements

Tip Why
Be honest about what you can pay Unrealistic promises lead to default
File all returns CRA won’t negotiate if you have unfiled returns
Document everything Keep records of all agreements
Make payments on time Missing payments can void the arrangement
Call if circumstances change Better to renegotiate than default
Consider professional help For large debts or complex situations