Income tax: Repayment options if you owe money to CRA
Getting an income tax refund can be a nice bonus for your budget, but an unexpected tax charge can be an unpleasant surprise, especially if you don’t have cash on hand.
But experts say the Canada Revenue Agency is willing to work with taxpayers to adjust payment plans and may even be able to waive interest they might otherwise have to pay.
Aaron Gillespie, corporate tax partner at KPMG in Hamilton, said if you don’t have the cash to pay your bills, the first thing to consider is whether you can borrow money at an interest rate lower than Canada’s current 9%. That’s it. The Revenue Service will bill you for the delinquent tax.
“Usually CRA funding is not a good option,” he said, adding, “Usually, you would be tempted to look elsewhere for lower interest rates.”
However, if you can’t do that, Gillespie recommends contacting the CRA as soon as possible and explaining the situation.
Any outstanding balance is due by April 30th. However, this year it falls on a Sunday, so the CRA will consider him receiving it by May 1 or on time if processed by a Canadian financial institution.
If you can’t pay the full amount, you can pay part of it. This reduces the amount of interest you borrow. You can also work out a payment plan with your CRA to pay your bills over time.
“What I have found is that they generally agree to a payment plan provided you are supportive and you are completely candid and disclose all your facts and your situation. about it.
Tax authorities also provide assistance in certain circumstances where the government may cancel or waive fines or interest levied on unpaid bills.
Fred O’Riordan, EY Canada’s National Tax Policy Leader, said one of the reasons the CRA is willing to give someone some relief is financial hardship.
“They don’t have discretion over taxes, but they do have discretion over fines and interest,” he said.
“You can make an initial application. They’ll respond. If you’re not happy with the decision, you can even send it back for reconsideration by the agency. They’ll reconsider it.”
Both Gillespie and O’Riordan said they should file their returns on time, even if they don’t have cash or can’t borrow money to pay their taxes.
Most Canadians should file their returns by Monday this year, but the deadline for self-employed is June 15th. And the ongoing federal strike of more than 100,000 people this week includes staff from her CRA, which tax officials have yet to declare. So far, we are getting closer to the submission deadline for this year.
Mr O’Riordan added that ignoring the issue and not filing the return would only make matters worse.
“Sooner or later you will be caught,” he said. “And the more you try not to get caught, the more dire the consequences, because your fines and interest are ever-increasing.”
Gillespie said don’t ignore the CRA.
“The CRA has a lot of power and can take serious legal actions, such as wage garnishment and asset seizure,” he said.
This report by the Canadian Press was first published on April 27, 2023.