Can't pay your 2025 tax balance? Here's what to do
File your return on time even if you can't pay the full amount. Filing on time stops the 5% late-filing penalty. Interest accrues on unpaid balances regardless, but interest is far less expensive than combined penalty and interest.
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File first, pay later — the core strategy
The most important thing you can do if you can't pay:
File your T1 return by April 30, 2026with the balance showing. You don't need to pay at the same time. Filing on time stops the 5% late-filing penalty. Interest on the unpaid balance starts May 1 — that's unavoidable — but interest alone is far less than penalty plus interest. A $5,000 balance accrues roughly $350/year in interest at 7%. That same balance plus a 5% late-filing penalty immediately adds $250, and another $50 per month after that.
Payment options
Pay what you can, when you can. Every dollar paid reduces the balance that interest accrues on.
- Online banking: Add "Canada Revenue Agency — Personal Income Tax (T1)" as a payee and use your SIN as the account number.
- My Payment: CRA's portal at canada.ca accepts Interac and Visa/Mastercard debit.
- Pre-authorized debit: Set up recurring payments via CRA My Account.
- In person: Canada Post locations accept CRA payments for a small fee.
- Cheque or money order: Mail to the Receiver General with your SIN and tax year on the front.
Setting up a payment arrangement
If you cannot pay the full balance by April 30, contact CRA to set up a Taxpayer Payment Arrangement (TPA). CRA will negotiate a monthly payment schedule based on your ability to pay.
- By phone: Call CRA Collections at 1-888-863-8657 (individuals). Have your SIN, return information, and a realistic monthly payment figure ready.
- Online: CRA My Account has a "Payment arrangement" feature where you can propose a plan without calling.
Interest continues to accrue on the outstanding balance during an arrangement. CRA will not waive interest simply because an arrangement is in place — but meeting your arrangement terms prevents escalation to collections.
If you genuinely cannot pay anything
File your return first — always. Then contact CRA and explain your situation honestly. CRA can accept very small monthly payments when financial hardship is genuine and documented.
If CRA determines the debt is unrecoverable, they may write it off administratively — but this is rare and not guaranteed. In extreme cases, personal bankruptcy discharges most CRA debts (with exceptions for fraud). A Licensed Insolvency Trustee can advise on this path.
Taxpayer Relief Program
The Taxpayer Relief Program (Form RC4288) allows CRA to cancel or waive penalties and interest when extraordinary circumstances prevented payment. Qualifying situations include serious illness or accident, natural disaster, CRA processing error or unreasonable delay, or financial hardship demonstrably beyond your control.
Submit Form RC4288 with supporting documentation. CRA has up to 10 years to grant relief from the date of the original assessment. Approval is at CRA's discretion — document your circumstances thoroughly and include any medical records, insurance claims, or employer letters that support your case.
Common mistakes
Mistake
Not contacting CRA proactively
CRA is significantly more cooperative with taxpayers who reach out before collections contact them. If you know you can't pay by April 30, call before the deadline — not after receiving a collections notice.
Mistake
Setting a payment arrangement too small to cover daily interest
If your monthly payment barely covers the interest accruing on the balance, the debt grows rather than shrinks. Ask CRA what the minimum payment is to actually reduce the balance, and aim above that.
Quick wins
Quick win
Set up direct debit from your chequing account
The most reliable way to keep a payment arrangement current is pre-authorized debit set up through CRA My Account. It removes the risk of a missed payment restarting the collections process.
Quick win
If you're self-employed and always owe, start quarterly instalments now
CRA requires quarterly tax instalments if your net tax owing exceeds $3,000 ($1,800 in Quebec) in the current and either of the two prior years. Setting them up voluntarily avoids instalment interest and eliminates the April lump-sum shock.
FAQ's
Will CRA take me to court if I can't pay?
CRA's preference is always to collect through payment arrangements rather than legal action. CRA can and does garnish wages, freeze bank accounts, and register liens on property — but these escalation steps take time and typically happen after other collection efforts have failed. Calling CRA proactively (1-888-863-8657) before collections contact you significantly increases the likelihood of an agreeable payment plan. Court action is a last resort used only in serious, prolonged cases.Does CRA charge interest on a payment arrangement?
Yes. CRA's prescribed interest rate continues to accrue on any unpaid balance during a payment arrangement — it doesn't pause. As of Q1 2026, the prescribed rate on overdue taxes is approximately 8% annually, compounding daily. This is why it's worth paying as much as possible upfront and setting up the largest monthly payment you can manage — each dollar paid reduces the balance interest accrues on.Can I pay my tax bill with a credit card?
Not directly through CRA — CRA does not accept credit card payments. However, you can use PaySimply (a third-party service) or some financial institutions to pay CRA with a credit card or prepaid card, though a service fee applies (typically 2–3%). Most people pay CRA via online banking (pay to "Canada Revenue Agency - Personal Income Tax"), My Payment (Interac or debit card via the CRA website), or by mail. In-person payments at Canada Post are also accepted.What if I genuinely cannot afford to pay anything?
File your return anyway — the late-filing penalty is a separate and more expensive problem than interest on an unpaid balance. After filing, contact CRA to explain your situation. If your inability to pay is due to serious financial hardship, you may qualify for the Taxpayer Relief Program (Form RC4288) which can waive or cancel interest and penalties. CRA can also set a monthly payment as low as circumstances require. Document your financial situation thoroughly if applying for relief.