Struggling to Pay Your Tax Bill? Experts Recommend Filing Your Return on Time and Keeping Calm

Many Canadians look forward to receiving a tax refund, but for some, tax time can bring an unexpected or higher-than-anticipated bill instead.

If you find yourself in this situation without the funds to pay the bill, tax experts advise against panicking.

According to Ottawa-based accountant Marlene L. Grant, it’s crucial to file your tax return on time even if you can’t afford to pay the amount owed to avoid additional penalties.

“You need to file your taxes to avoid late filing penalties and other consequences,” Grant explained.

The late-filing penalty imposed by the Canada Revenue Agency (CRA) is five percent of the balance owing for 2024, with an additional one percent for each month filed after the due date, up to a maximum of 12 months.

For those who faced late-filing penalties in previous years and received a formal demand from CRA, the penalty for 2024 will be even higher at 10 percent of the balance owing, plus two percent for each month filed after the deadline, up to a maximum of 20 months.

Related Stories

In addition to penalties, CRA will apply interest to any outstanding amount owed for 2024 starting the day after the payment is due.

Grant suggests considering borrowing money at a lower interest rate than what CRA would charge. If that’s not an option, she advises clients to make a partial payment and then contact CRA to arrange a payment plan.

It’s crucial to stick to the payment plan to avoid further consequences, as Grant explains, “If you fail to adhere to the agreement, CRA may demand immediate payment.”

The tax filing deadline is April 30 this year, with an extended deadline to June 16 for self-employed individuals and their spouses or common-law partners due to a Sunday falling on June 15.

Regardless of the deadline extension, if you owe taxes, whether self-employed or not, the payment deadline remains April 30. Interest will accrue on any outstanding balance after this date until the bill is settled, though a late-filing penalty will only apply if you miss the June deadline.

While employers deduct income tax from regular paychecks, freelancers and contract workers may not have tax withheld, leading to a tax bill at year-end. Multiple employers or taxable investment gains can also result in unexpected tax liabilities.

If you have outstanding tax obligations, CRA may divert federal payments such as the GST/HST credit to cover the debt.

Tax consultant Sunny Widerman advises against ignoring CRA communications and emphasizes the importance of responding promptly. She notes, “CRA is more flexible than people think, but they require communication to resolve issues.”