How Can I Pay My Tax in Payments?

There are situations where individuals face some financial constraints and cannot pay the full amount of tax at the time of deadline. The good news for Canadian citizens is that if you cannot pay the full balance, you can set up a payment arrangement with the CRA.

Go through this informative guide – How can I pay my tax in payments, what is a payment arrangement, to know the options, the process, and how Taxccount Canada can be of help to you.

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Can You Pay Your Taxes in Payments?

Yes! If you owe taxes to the government and cannot pay the full balance by the deadline, then the Canada Revenue Agency (CRA) allows taxpayers to pay their taxes in payments. This can be done by setting up a payment arrangement.

This payment arrangement allows you to pay tax debt in small monthly amounts over time, instead of paying the entire amount as a lump sum. However, the interest will continue to accumulate on the unpaid balance until you pay it fully.

Note – You still have to file your return on time, even if you cannot pay it immediately.

Set Up Tax Payments

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Step 1 – File Your Tax Return on Time

Before you request a payment plan from the CRA, you must –

File your personal income tax
Receive the Notice of Assessment
Confirm the total balance that you owe

Late filing can result in penalties, which may increase the amount that you owe. Even if you cannot pay the complete amount right away, it is recommended to file before the deadline (which is usually April 30 for most individuals in Canada).

Step 2 – Determine What You Can Afford

The CRA expects that you’ll make a reasonable payment arrangement based on your financial condition. Make sure to calculate the following before you contact them –

Your monthly income
Existing debts
Essential living expenses
How much can you realistically pay every month

Be honest and set realistic targets. If you agree to pay taxes in payments, it is important to follow it diligently. In case you agree to payments you cannot maintain, then the arrangement may be cancelled.

Get in touch with a tax specialist like Taxccount Canada to know more about this.

Step 3 – Contact the CRA to Set Up a Payment Arrangement

You can request a payment plan from the CRA in any of the following methods –

Online Through CRA My Account

This is the easiest way. On the CRA My Account portal, you can –

View your balance
Propose a monthly payment amount
Select a payment date

By Phone

You can get in touch with the CRA’s collections department to explain your situation and negotiate the terms with them. They may ask about your income, expenses, and assets to determine a reasonable repayment plan. So, tell them honestly.

What Happens After You Set Up Payments?

Once your payment arrangement is approved by the CRA –

You must make the payments on time
Interest continues to accumulate daily on the unpaid amount
Missing payments can cancel your arrangement

If you fail to follow the arrangement and make timely payments, the CRA may take legal action, including wage garnishment or freezing your bank accounts.

Interest and Penalties on Payment Plans

A lot of people get confused that if they have set up a payment arrangement, what about the interest? Even with a payment arrangement –

The interest continues to accrue until you fully pay off the balance
Late filing penalties are still applicable if you file your return after the deadline
Compound daily interest increases the total amount that you owe

That’s why it is recommended that you pay off your balance as quickly as possible to save money in the long run. Get in touch with the experts at Taxccount Canada to guide you through paying taxes in payments.

Other Ways to Pay Your Tax Balance

Even if you cannot fully pay off the balance, there are still multiple payment methods available to choose from –

Online banking (you can add CRA as a payee)
Pre-authorized debit
Credit card (through third-party providers)
In person at your bank
Debit card (can be done online)

Setting up automatic withdrawals is a great idea. It ensures that you don’t miss payments and stay compliant with CRA guidelines on payment arrangements.

What If You Cannot Afford These Payments?

If you are facing some serious financial constraints, the CRA may consider –

Extending your payment timeline
Temporarily delaying the collections
Accepting smaller payments

In rare cases of extreme financial hardship, you can also apply for taxpayer relief for penalties and interest. However, approval is not guaranteed.

Getting professional help is the best in such situations, and who better than Taxccount Canada to help you?

Instalment Payments vs. Payment Arrangements

These are two different concepts, and you shouldn’t confuse them.

Tax Instalments

Tax instalments are applicable if you consistently owe more than $3000 in taxes each year. In such cases, the CRA may ask you to prepay the taxes quarterly for the next year.

Payment Arrangements

On the other hand, a payment arrangement is when you already owe taxes and request the CRA some extra time to pay the balance.

If you’re unsure which of these two situations applies to you, the tax experts at Taxccount Canada can help you.

What Happens If You Ignore Your Tax Debt?

Ignoring the CRA debt may lead to serious consequences like –

Repeated collection calls
Wage garnishment
Freezing of your bank accounts
Seizing your assets
Impact on your credit score

The CRA has a strong legal authority to collect unpaid taxes. It’s always recommended that you communicate proactively rather than avoid the situation, and if you think it is too overwhelming for you to handle, get professional help.

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