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CRA Tax Payment Plans

A CRA tax payment plan is intended to allow those who owe money to the CRA to pay it off in a reasonable time frame that works for both parties. However, negotiating a fair tax payment plan can be a complex and frustrating experience. You need an experienced professional on your side to negotiate on your behalf.

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CRA Tax Payment Plans


Our experienced team can help you negotiate a reasonable CRA tax payment plan so you can pay your tax debt.


Arranging CRA Tax Payment


If you have a large tax debt, it can be very difficult to pay this debt down. The Canada Revenue Agency (CRA) will not even consider taking less than the full amount owed to it. In the CRA’s mind, this debt is owed, and you are expected to pay.

However, some people who have tax debt simply do not have the money to pay it. This is especially true if you have a very large debt. Over time, interest continues to grow, and that means your tax debt becomes even more difficult to pay. The CRA charges significant interest and penalties, which make this situation even more difficult.

For instance, if you have a balance owing, the CRA charges compound daily interest on any unpaid amounts the day after they are due. Plus, you will be charged interest on the penalties starting the day after the filing due date.

In addition, if you file your taxes late, you will also be charged a late filing penalty which can be quite significant. The penalty will be 5% of the most recent balance owing, plus an additional 1% for every full month your return is late, up to a maximum of 12 months. However, if you were charged a late filing penalty in any of the three previous tax years, the penalty for filing late this year could be 10% of the most recent balance owing plus an additional 2% for each month, up to a maximum of 20 months. This means that you could potentially owe up to 50% of your tax debt in penalties.

These interest charges and penalties can make CRA tax payment very difficult for many people. The longer you wait to resolve your tax situation, and the longer you go without paying the CRA what is owed, the more expensive and complicated your situation will become. It is best to work to resolve your situation as soon as possible.

That said, arranging a CRA payment plan is difficult. The CRA will not accept less than is owed to it and, in many cases, CRA payment arrangements are very favourable to the agency, but difficult for people to afford.

We can help. Contact us today to find out how our tax professionals can work to resolve your situation.

Dealing with Tax Debt and Negotiating Income Tax Instalment Payments


If, for whatever reason, you owe a large tax debt to the CRA, it’s important to realize that you cannot hide. The CRA is very large and very powerful and it will find you. You will need to deal with your situation at some point, and it is better to do it sooner rather than later. If you cannot afford to pay your taxes now, you will need to make CRA payment arrangements. Doing nothing is not an option.

In some cases, some people believe that it’s better to not file their taxes if they owe money and they’re not able to pay it. They might think that, by not filing, they won’t have to pay. However, this isn’t the case. The CRA simply doesn’t “forget” about you. Just because the agency isn’t contacting you right away, it doesn’t mean that you won’t still be charged interest and penalties. When the agency does finally contact you, you could quickly find out that you owe a very large amount. This will make CRA tax payment very difficult.

It’s also important to note that, if you know you owe taxes and you aren’t filing, the CRA could consider this to be tax evasion. This charge can potentially result in criminal charges against you. It’s not, however, a crime to file your taxes and not be able to pay.

For these reasons, it’s best to file your returns as soon as you can, even if you owe money and aren’t able to pay it right away. Once you’ve filed, you can then focus on arranging a CRA tax payment plan. However, it’s important to note that arranging income tax instalment payments on your own will be incredibly tough. That’s because the CRA is an experienced and difficult negotiator. CRA tax instalments are not easy to arrange.


Negotiating a CRA Tax Payment Plan


With some other creditors, you can contact them and let them know that you are having financial difficulties and request that they accept less than is owed to them. Since many creditors would rather take some money instead of taking the risk that you will default on the loan, they may accept a smaller payment arrangement. However, the CRA is not like most creditors. It will not accept less than is owed to it and it knows that it has the power to enforce very strict requirements on any CRA instalment payments that are arranged.

The Canada Revenue Agency has incredibly strong collection powers and it uses the threat of these powers as leverage in negotiations. What does this mean? It means that the CRA knows that it can collect if it needs to. It is often unwilling to agree to income tax instalment payments for this reason. That means that making CRA payment arrangements is typically quite difficult.

In some very specific situations, the agency may reduce or waive penalties or interest charges, but the overall amount of tax debt owed will not decrease.

However, the agency may accept a monthly CRA payment plan. In reality, though, trying to arrange a CRA tax payment plan on your own can be very dangerous. This is because, in exchange for agreeing to a short-term payment plan and accepting CRA instalment payments, the agency will often want significant financial disclosure. This means that the agency will require details such as where you bank, where you work, and details such as your household expenses, your assets, your debt, and more.

When you provide the CRA with these financial details about yourself, the agency will also use them to structure the payment plan, and this could hurt you. For instance, the agency may look at how much you are repaying in credit card debt each month and determine that the money you are spending to reduce this debt could instead go towards your tax debt. This could mean that you’ll have to pay only the minimum payment on your credit cards to meet the CRA’s payment schedule, which can cost you a lot of money in interest charges. Remember, the CRA will always consider the debt owed to it the primary and most important debt.

You should be very careful with what information you choose to disclose to the CRA. In the future, when your CRA tax payment plan expires or if you miss a payment, the CRA could use the information it has in enforcement action on your income, home, or bank account to force you to pay your tax debt in full.


Working with Tax Experts to Resolve CRA Tax Payment Issues


If you wish to arrange CRA tax instalments, do not do so on your own. Arranging a CRA payment plan is best handled by experienced tax professionals.

We have a successful history of negotiating CRA tax payment plans for our clients. Our team is made up of experienced ex-CRA, legal, and accounting professionals who know how to resolve tax issues. Communicating and negotiating with the CRA is difficult. Not only is the agency very powerful (and it uses the threat of CRA collection methods to influence negotiations) but it can also be confusing and time-consuming to deal with. Our experts understand CRA processes and how to successfully navigate them. We work with individuals and businesses to resolve tax issues and negotiate CRA tax payment plans that are practical and reasonable.

For more information, please contact us today.

Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:

  • 1| Offer a comprehensive solution that is focused on achieving the most favorable possible outcome for your tax issue;
  • 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
  • 3| Offer a complete solution to your tax problems, including ex-CRA professionals in affiliation with tax lawyers from Farber Tax Law.