How do I set up a payment plan with CRA?

Call CRA Collections at 1-888-863-8657. A collections agent will review your balance, ask about your financial situation, and agree to a payment arrangement. You can also set up a pre-authorized debit plan through CRA My Account under "Payments," which lets you schedule regular payments without calling. Either way, you must pay the full balance before the next tax season to avoid your new refund being applied to the debt automatically.

Does CRA charge interest on a payment plan?

Yes. A payment arrangement does not stop interest from accruing. CRA charges compound daily interest at the prescribed rate (the Bank of Canada overnight rate + 4%, currently around 8% annually) on the portion of the balance that remains unpaid. However, if you are on an approved payment arrangement, CRA will typically not take collection action and will not levy additional penalties on top of the interest.

What is the minimum payment CRA will accept?

There is no published minimum — CRA collections agents use judgment based on your income, expenses, and the size of the debt. Expect to pay the full balance within 12 months at most. If you propose very low payments that would take longer than a year to clear the debt, CRA may reject the arrangement and proceed with other collection methods. Pay as much as you can afford to minimize interest.

Can CRA garnish wages if I do not pay?

Yes. If you ignore your CRA debt, CRA can issue a Requirement to Pay (RTP) to your employer or bank without a court order. This can result in up to 50% of your wages being redirected to CRA until the debt is paid. Setting up a payment arrangement before collection action begins is far preferable. See our CRA Collections guide for full details.

Can I get CRA to waive interest or penalties?

Possibly. Under the Taxpayer Relief provisions (formerly called the Fairness Program), CRA has discretion to cancel or waive penalties and interest if you have a legitimate reason — job loss, serious illness, natural disaster, or a CRA error caused the debt. Submit Form RC4288 (Request for Taxpayer Relief) or apply online through My Account. Relief is not automatic and decisions can take 12–18 months.

How to Set Up a CRA Payment Plan in Canada

Owing CRA money is stressful, but the worst thing you can do is ignore it. CRA has powerful collection tools — including the ability to garnish wages and freeze bank accounts — but it also offers formal payment arrangements for taxpayers who cannot pay in full. Here is how to set one up and what to expect.

Why set up a payment arrangement?

When you owe CRA money you cannot pay immediately, a payment arrangement:

Stops most active collection action — CRA will not garnish wages or freeze accounts while you are honouring an arrangement
Avoids a Requirement to Pay (RTP) being sent to your employer or bank
Keeps your credit score unaffected — CRA does not report debts to credit bureaus directly (though property liens may appear)
Gives you structured time to pay — rather than a sudden 50%-wages garnishment

Interest continues to accrue, but the arrangement prevents escalation.

How to contact CRA to set up a plan

Option 1: Call CRA Collections

Phone: 1-888-863-8657 Hours: Monday to Friday, 7:00 am – 8:00 pm (local time)

Before you call, have ready:

Your SIN
Recent Notice of Assessment showing the amount owing
Bank statements or a rough idea of your monthly income and essential expenses
The amount you can realistically pay per month

The collections agent will:

Confirm the balance owing (including accrued interest)
Ask about your financial situation
Propose payment terms — usually full balance within 12 months
Set up a pre-authorized debit (TPD) agreement if you agree to the terms

Option 2: Pre-authorized debit via CRA My Account

If your situation is straightforward (you know what you owe and have a regular income), you can bypass calling and set up automatic payments directly:

Log in to CRA My Account
Under “Payments to CRA”, select “Pre-authorized debit”
Enter your bank account (transit and institution numbers)
Set a weekly or monthly payment amount and start date
CRA will debit your account automatically on schedule

This avoids hold times and is often faster. However, if you have a very large balance or a complicated situation, calling is better — an agent can flag your account and prevent collection action while the arrangement is being set up.

What CRA expects from a payment arrangement

CRA’s priority is full payment, ideally within 12 months. Expect agents to push for:

A payment amount that clears the entire balance (principal + interest) in 12 months or less
Immediate payment of any amount you can pay upfront to reduce the balance
A start date within the same week as the call

If you propose payments that would take longer than 12 months, CRA may ask for financial documentation (pay stubs, bank statements) before agreeing, or may not agree at all.

Interest math example: If you owe $10,000 at 8% annual compound interest during a 12-month repayment period, you will pay approximately $430 in additional interest over the year. Paying it off in 6 months instead would reduce interest to about $220. Pay as much as you can afford up front.

What happens if you miss a payment

If you miss a scheduled payment under your arrangement:

CRA will contact you — usually by letter or phone within a few weeks
Your arrangement may be cancelled if you do not respond or catch up
Collection action resumes — CRA can issue an RTP or garnish wages

If you realize you will miss a payment, call CRA Collections before the missed date to adjust the arrangement. They are generally willing to adjust terms once, especially for a one-time financial hardship.

Taxpayer Relief: reducing penalties and interest

If you accrued the debt because of circumstances beyond your control — a serious illness, a natural disaster, or even CRA’s own processing error — you may qualify to have penalties and/or interest reduced or cancelled under the Taxpayer Relief provisions (Income Tax Act subsection 220(3.1)).

Qualifying circumstances:

Extraordinary circumstances (job loss, divorce, mental health crisis, fire, flood)
Medical conditions preventing timely filing or payment
CRA errors or delays that caused or increased the debt
Financial hardship (interest is so high it is preventing payment)

How to apply:

Submit Form RC4288 (Request for Taxpayer Relief) or apply online through My Account → “Submit documents” → “Request for taxpayer relief”
Attach supporting documentation (medical letters, severance notice, etc.)
Expect a decision in 12–18 months (applications are reviewed by CRA’s Taxpayer Relief Team, not Collections)

Relief is discretionary — there is no guarantee. Focus on setting up a payment plan first; a relief application does not stop interest from accruing or collection action from proceeding.

Voluntary disclosures vs. payment arrangements

If your debt arose partly from unreported income or unfiled returns, a payment arrangement with Collections is separate from the Voluntary Disclosures Program (VDP). You may want to pursue a VDP application first if you have unfiled years — see our CRA Voluntary Disclosures guide for details.

CRA Collections Explained — What happens if you do not pay
How to Pay CRA Online — Methods for making payments
CRA Voluntary Disclosures Guide — If the debt came from unreported income or unfiled returns
How to Appeal a CRA Decision — If you disagree with the balance amount