Tips to Avoid CRA Late Payment

CRA late payment penalty

Angry about the Canada Revenue Agency charging you interest on your tax bill? Here are some tips on how to avoid paying CRA late payment penalty:

File your tax return on time.

Remember to file your tax return right on time. This may seem obvious, but it’s the single best way to avoid paying CRA late payment penalties. Those late payment penalties can start to add up, especially if you are paying a larger tax bill.

Pay Off Any Outstanding Taxes

If you owe taxes, get them paid off as soon as possible. The late fees and penalties can really start to add up. Owed taxes are considered a priority debt and the Canada Revenue Agency can take measures to collect those debts.

If you can’t file on time, file for an extension. If you need more time to get prepared for your return, you can file for an extension. This will give you an extra 6 months to file your return.

E-file Your Return

If you want your refund faster and to reduce your chance for paper processing mistakes, e-file your return. You can e-file with us, or any other reputable tax preparation company.

Pay your taxes owed as soon as possible

Even if you can’t pay the full amount, paying what you can will minimize the interest you owe. A $300 payment on a $2,000 balance would leave you with a balance of just under $1,400. Your monthly interest payments would be lower and you’d be able to pay off the balance in as little as 12 months.

Don’t let the math scare you

Planning to pay off your debts as fast as possible may seem difficult and stressful, but it’s important to remember that your financial habits matter more than an exact number.

“When it comes to repaying your debt, there’s no one-size-fits-all solution,” Gottfried says. “What’s important is that you’re creating and following a budget to repay your debt.”

If you can’t pay, contact the CRA

If you can’t pay your taxes, contact the CRA and explain your situation. They may work with you to set up a payment plan. If you can pay your taxes, pay as soon as you can. Interest and penalties on unpaid taxes will add to the amount you owe.

Check your tax bill for errors

If you think there’s an error on your tax bill, contact the CRA and ask them to review it. Never refuse to pay the full amount of your tax bill, even if you think it’s too high. The amount of interest you’ll pay on the outstanding balance will be much higher than any refund you’re owed.

Appeal CRA decisions

If you disagree with any of the CRA decisions, you have the right to appeal it.

Get help from a professional

If you’re having trouble dealing with the CRA, there are professionals who can help. The Taxpayer’s Ombudsman provides an independent and objective review of complaints with the CRA.