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(John Tomaselli/photos.com)
(John Tomaselli/photos.com)

Understanding Tax

What happens if you don't pay your tax bill Add to ...

If you don’t pay the tax you owe by April 30 each year, the Canada Revenue Agency (CRA) will charge you interest at the prescribed interest rate:

  • Interest is compounded daily on the amount you owe starting on May 1.
  • The prescribed interest rate can change every 3 months.

Warning: If you owe tax and don’t pay it by April 30, you'll be charged interest on the amount you owe starting on May 1. The interest is compounded daily.

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If you can’t afford to pay your taxes

If you can show the CRA that you have reasonably tried to get the money and you still can't pay your balance in full, you can request a payment arrangement. This is a plan to help you pay your taxes. But you will still be charged daily compound interest on any unpaid balance (starting May 1) until you pay it in full. Learn more about payment arrangements with the CRA.

Tip: Even if you can't pay all of the taxes you owe, you should still file your return on time to avoid any late-filing penalties.

Taxpayer relief

The CRA may waive or cancel penalties and/or interest on your unpaid taxes in certain circumstances. This is known as taxpayer relief. This may happen if:

  • You lose your job — or suffer some other financial hardship.
  • There are circumstances beyond your control — for example, disasters like fires and floods, disruptions like a postal strike, a serious illness or accident, or serious emotional or mental distress, such as a death in the immediate family.
  • The CRA made an error — for example, processing errors, errors in CRA publications or incorrect information provided to taxpayers, and unreasonable processing delays.

How to request taxpayer relief

  1. Complete Form RC 4288 to apply for relief within 10 years of the tax owing.
  2. Give the facts and reasons why the charges should be cancelled or waived.
  3. Include all relevant supporting documents and information.

If you refuse to pay your taxes

If you don't take steps to resolve your unpaid taxes, the CRA can take legal action against you. It can:

  • "garnishee" your income or your bank account, which means that some or all of your pay cheque could go straight to the CRA, or
  • seize and sell your assets to settle your tax bill.
     


 

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

Follow us on Twitter: @GlobeInvestor

 

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