What Happens If You Owe the CRA and Can't Pay

The number on your notice of assessment is more than you have. Or a reassessment just arrived for a year you thought was finished, and it says you owe $20,000. If you owe the Canada Revenue Agency (CRA) and can’t pay, nothing happens overnight. It normally can’t garnish your pay or bank account until 90 days after your notice. But interest adds up every day, and the CRA keeps your tax refunds and most credits.

A payment plan the CRA accepts, which it calls a payment arrangement, is what stops it from going further, and you can often set one up online. This page is about personal income tax. If the CRA is collecting an overdue student loan, different rules apply. If you live in Quebec, you may also owe Revenu Québec, which has its own section below.

What happens if you owe the CRA and can’t pay?

Your balance is due by April 30, or right away if it comes from a reassessment (opens in a new tab). If you don’t pay or call, the CRA can keep money it owes you, then warn you, garnish your income or accounts, and eventually put a lien on what you own.

The 90-day wait has exceptions. If the CRA believes waiting puts the debt at risk, for example because you’re selling off what you own (opens in a new tab), it can ask a court for a jeopardy order (opens in a new tab) and act right away. If you’ve left or are about to leave Canada, it can demand immediate payment. If the CRA denies a credit for a donation made through a tax shelter, it can also collect half of the tax right away, even if you file an objection.

Which payments can the CRA keep?

The CRA can apply your tax refund and credits (opens in a new tab), such as the Canada Groceries and Essentials Benefit, to your tax debt, even while you’re on a payment plan. Child benefits aren’t applied automatically. It can also ask other federal departments (opens in a new tab) to send it money they owe you, including Canada Pension Plan and Old Age Security payments, or your pay if you work for the federal government.

What to do first

1. File any return that’s due, even if you can’t send money with it. If a return is more than a year late or you left income off, read about voluntary disclosure (opens in a new tab) first, because it can cancel the penalties.
2. Check the amount in your CRA account and, if you live in Quebec, in My Account for individuals at Revenu Québec. If it looks wrong, call the number on your notice.
3. Set up a payment plan you can keep up with, and pay what you can now.
4. If you can’t afford any plan, ask about taxpayer relief (opens in a new tab) or talk to a licensed insolvency trustee about a consumer proposal or bankruptcy.

How much does owing the CRA cost?

Interest is the main cost. As of November 2026, the CRA charges 7% a year (opens in a new tab), compounded daily, so you pay interest on past interest too. It applies to the tax and to any penalties, and the rate can change every three months. It keeps running while you’re on a payment plan, disputing the bill or waiting for a relief decision.

The interest columns assume 7% the whole time, with no payments and no penalty added.

File on time even if you can’t pay

Filing late costs much more than paying late. If you file late and owe tax, the penalty (opens in a new tab) is 5% of what you owe plus 1% for each full month you’re late, up to 12 months. If you were penalized in one of the three years before and got a demand to file, it’s 10% plus 2% a month, up to 20 months.

Filing late can also delay your benefit and credit payments. Most people have until April 30 to file and pay. If you or your spouse or common-law partner is self-employed, you have until June 15 to file, but your payment is still due April 30 (opens in a new tab).

Why a reassessment can arrive with interest already on it

Interest on a reassessment doesn’t start the day the CRA sends it. It starts the day after the original due date (opens in a new tab). So if a reassessment sent in November 2026 adds $10,000 to your 2023 return, about $2,170 in interest has already built up. It started on May 1, 2024, when the rate was 10% (opens in a new tab).

What happens if you don’t pay CRA instalments?

You’re charged instalment interest (opens in a new tab) at the same rate as other tax debts, compounded daily, if it comes to more than $25. There’s also a penalty, but only if that interest is more than $1,000 for the year. Paying your next instalment early, or paying extra, can reduce both.

An instalment reminder isn’t a bill. You only have to pay instalments (opens in a new tab) for 2026 if your net tax owing is more than $3,000 ($1,800 in Quebec) in 2026 and in either 2025 or 2024. If you expect to owe less than that for 2026, you don’t have to pay them, though you can be charged interest (opens in a new tab) if your estimate turns out too low. Different rules apply if you farm or fish for a living.

How do you set up a payment arrangement with the CRA?

You can do it online or by phone, and you don’t need to hire anyone. If you owe $1,000 or more in personal income tax, look for the Manage balance service (opens in a new tab) when you sign in to your CRA account. Without speaking to a collections officer, you can make a payment or schedule a series of payments there. You can also ask for a call.

If you don’t see that service, there are three other ways to do it:

• Online. In your CRA account, which the CRA also calls My Account, select “Proceed to pay”, then “Schedule a series of payments” (opens in a new tab). You pick the amounts and dates, and the money comes out of your chequing account. The first payment has to be at least five business days away (opens in a new tab), and My Account estimates the interest (opens in a new tab) for you.
• Automated phone line. For personal income tax only, call TeleArrangement (opens in a new tab) at 1-866-256-1147, Monday to Friday, 7 a.m. to 10 p.m. ET.
• An agent. Call 1-888-863-8657 (opens in a new tab), Monday to Friday, 8 a.m. to 8 p.m. ET. If a collections officer has written to you, call the number on the letter.

An arrangement made by phone doesn’t start your payments on its own. You still have to make the first payment (opens in a new tab).

What a payment plan costs

At 7%, equal monthly payments work out like this:

These figures start from today’s balance and assume the rate doesn’t change. They show the cost, not what the CRA will agree to.

What the CRA looks at before agreeing to a plan

The CRA’s policy (opens in a new tab) is to consider a plan based on what you can afford, once you’ve tried to borrow or rearrange your finances and still can’t pay in full. A collections officer can ask for proof of your income, expenses, assets and debts, and may check it. The CRA’s worksheet (opens in a new tab) helps you work out a realistic payment. If you disagree with an officer’s decision, you can ask to speak to their supervisor.

The CRA doesn’t publish a maximum length or minimum payment. But the Taxpayers’ Ombudsperson reported in 2019 (opens in a new tab) that it has internal limits, and that a plan outside them doesn’t count as an acceptable arrangement. The CRA says (opens in a new tab) a collector has some discretion. If your plan is long or the payments are low, call to confirm the CRA accepts it, and ask for a confirmation letter.

If something outside your control means you can’t pay anything right now, the CRA may let you postpone payment (opens in a new tab) until things improve. Interest and penalties keep adding up during that time.

What keeps a plan in place

Make each payment on the date you agreed to, and file every future return on time (opens in a new tab). If you can’t make a payment, call before it’s due, because paying less than you agreed to without changing the plan can lead to legal action. On a pre-authorized debit plan, changes have to be made at least five business days before the payment date (opens in a new tab), and the CRA can cancel the agreement if a payment bounces.

Can you pay the CRA with a credit card?

Yes, but only through a third-party provider (opens in a new tab), PaySimply or Plastiq. The CRA doesn’t take credit cards directly. As of November 2026, PaySimply (opens in a new tab) charges 2.49% on a card. After that fee, your card’s interest rate applies unless you pay off the card in time.

Say you owe $5,000 and take 24 months to pay it off. On a CRA plan at 7%, that’s about $374 in interest. On a card at 20.99%, it’s about $1,319, including a $125 fee. Even if you clear the card before interest starts, that 2.49% fee is about four months of CRA interest, so a card rarely saves money unless its rewards are worth more than the fee.

A line of credit saves money only if its rate is under 7%. The prime rate is 4.70% (opens in a new tab), so it depends on how much your bank adds to it. A payday loan costs far more than any of these.

You can also pay through online banking (opens in a new tab), with a debit card on the CRA’s My Payment service, or at your bank’s counter. Any amount helps. A partial payment (opens in a new tab) lowers the interest and doesn’t stop you from asking for relief.

Can the CRA take money from your bank account?

Yes. Once the 90 days are up and it has warned you, the CRA can send your bank or your employer a requirement to pay (opens in a new tab), a document ordering them to send it your money. It doesn’t need a court order. Whoever receives the document has to comply, and the CRA sends you a copy. The CRA can also take commissions, rent, investment income and other money people owe you.

The Income Tax Act (opens in a new tab) doesn’t set a percentage of your pay or account that the CRA can take. The document says how much: a fixed amount, a percentage of each payment, or the full amount up to a maximum.

Once a garnishment starts, the CRA usually won’t stop (opens in a new tab) until the debt is paid or you can show it’s causing financial hardship. If it leaves you short for basics like rent or food, call the number on the document. Our guide to wage garnishment explains how it works for most other creditors, who need a court judgment first.

Can the CRA take your house?

It can, though it’s a later step. First it has to certify the debt (opens in a new tab) in Federal Court or get a provincial judgment, which makes the debt a public record. It can then register a lien on your home, car, cottage or other property, so the debt gets paid out of any sale before you see the money. If the debt stays unpaid, it can have a sheriff or bailiff seize and sell what you own, and you pay the costs.

Moving the house into your spouse’s name won’t protect it. If you transfer property to a related person (opens in a new tab) for less than it’s worth while you owe tax, the CRA can collect from them, up to the difference between its value and what they paid. The exception is a transfer under a court order or written separation agreement after a breakup.

How can you lower what you owe?

You can ask to have penalties and interest cancelled. The tax itself comes down only if your return or the assessment was wrong, if you settle it through a consumer proposal or bankruptcy, or in the rare case of a remission order.

If the amount is wrong

Call the number on your notice first. The CRA says (opens in a new tab) many disputes end there, but the objection deadline keeps running while you talk. If you missed a credit or deduction, you can change your return in your CRA account once you have your notice of assessment.

If you still disagree with the assessment, file an objection. You have one year after the filing deadline or 90 days after your notice (opens in a new tab), whichever is later, or just 90 days for tax on RRSP or TFSA over-contributions. If you miss the deadline because you were trying to sort it out with the CRA, or because of something outside your control, you can ask for an extension, up to one year after the deadline.

While your objection is open, the CRA normally holds off collecting the disputed amount until 90 days after its decision. It can still apply your refunds and credits.

Taxpayer relief covers penalties and interest, not the tax

The CRA may cancel or waive (opens in a new tab) penalties and interest when something outside your control kept you from meeting your tax obligations, like a serious illness or accident, a flood or fire, a death in your immediate family, or a CRA error or delay. It can also cancel interest for financial hardship, for example when the interest makes up a major part of what you owe and you can’t make a reasonable payment plan, or when it would make food, medical care, transportation or shelter hard to afford for a long time.

Apply (opens in a new tab) in your CRA account under “Request relief of penalties and interest”, or by mail with Form RC4288. For hardship, the CRA may ask for Form RC376 and three months of bank and credit card statements. It looks at (opens in a new tab) your filing and payment history, and whether you knowingly let a balance build up.

Expect to wait. The CRA puts the average at about 16 months (opens in a new tab), and if you’ve also filed an objection, it won’t make a final decision until that’s settled. Paying what you can in the meantime lowers the interest, and any interest it later cancels may be refunded. If it says no, you can ask for a second review, and you have 30 days from the day you get the decision to apply to the Federal Court for a judicial review.

Can you negotiate the tax down with the CRA?

You can negotiate how long you take to pay, not how much tax you owe. A federal remission (opens in a new tab) order can cancel tax, but the CRA calls it “a rare and extraordinary measure” and a last resort. A tax professional can be worth paying on a complicated dispute. But you can set up a plan and apply for relief yourself for free, so be careful with anyone charging a fee to make a CRA debt go away.

If the debt is more than you can ever pay

A consumer proposal, a legal deal to repay your creditors part of what you owe, can settle the tax for less than the full amount, if you owe $250,000 or less (opens in a new tab), not counting your home’s mortgage. Income tax goes in like other unsecured debt, and once your trustee files, collection stops (opens in a new tab) and no more interest is added (opens in a new tab). The CRA can force a creditors’ meeting (opens in a new tab) if it holds at least 25% of the debt. Creditors vote there by dollar value, so if most of your debt is to the CRA, its vote can decide the outcome.

Bankruptcy can clear it too, because income tax isn’t on the list of debts (opens in a new tab) that survive a bankruptcy. The exception is a very large tax debt. If you owe $200,000 or more in personal income tax (opens in a new tab), counting interest, penalties and provincial tax, and that’s at least 75% of your unsecured debts, you don’t get an automatic discharge (your release from the debts). A court has to refuse it, delay it or set conditions.

Neither one removes a lien the CRA has already registered (opens in a new tab), so it’s worth talking to a licensed insolvency trustee before it gets that far. A trustee can go through both options with you, and the first meeting is usually free.

How long can the CRA collect a tax debt?

Ten years (opens in a new tab), starting on the 91st day after your notice. That clock can keep restarting, though. It restarts when you make a payment or acknowledge the debt in writing, and when the CRA garnishes you or applies a refund or credit to the debt. It pauses during an objection or appeal, during a bankruptcy or proposal, and while you live outside Canada.

So waiting it out rarely works if you’re still filing here and getting refunds or credits. When the period does end, the CRA usually can’t take any more action, but the debt still exists.

What would the November 2026 federal budget change?

The budget, tabled on November 5, 2026, proposes changing several of the rules on this page. These changes aren’t law yet, so follow today’s rules until they take effect. These are federal changes, and Revenu Québec has its own rules for your Quebec return.

Before telling a credit bureau, the CRA would have to give you 30 days’ written notice, try to collect first and give you a chance to set up a repayment plan. It couldn’t report a debt while you can still object or appeal. With more time to object, you’d lose the option to ask for an extension. And if most of your income comes from a business, you could pay one instalment a year instead of four, starting with the 2028 tax year: two-thirds of your tax, by December 31.

What’s different if you live in Quebec?

Quebec residents file two returns, so you can owe both governments at once. A debt to Revenu Québec is separate from a debt to the CRA, with its own notices, its own plan and its own collections. The interest rate (opens in a new tab), the basic late-filing penalty (opens in a new tab), the 90-day wait (opens in a new tab) and the 10-year limit to collect (opens in a new tab) match right now. The plans and fees don’t.

Setting up a plan with Revenu Québec

You can propose up to 12 equal monthly payments online, through its automated phone line or with post-dated cheques. For the online and phone options, your returns must be filed and you can’t have another agreement in place. Online, you also can’t have a tax offence in the last two years. If those don’t fit, call its collections service to negotiate. It may charge a fee, and it may ask for your budget, bank statements, proof that you tried to borrow the money, or a bank guarantee or hypothec.

The 10% fee is a reason to act early, since it can be added once collection measures are used. If you’re in business and don’t file, Revenu Québec can also charge $25 a day, up to $2,500 (opens in a new tab). If you dispute a personal income tax assessment, Revenu Québec can’t collect (opens in a new tab) while your objection or appeal is being processed, but interest keeps running. When it does collect from your pay, it can take what it calls “the seizable portion of your income”, and our guide to wage garnishment shows Quebec’s formula.

For relief, use Form MR-94.1 or write a letter. Revenu Québec considers cases where you can’t pay a debt made up largely of interest, penalties or fees, as well as errors on its side and events like a flood, serious illness or a death in your immediate family. Mistakes by a third party or your tax software don’t qualify. If it accepts, the relief takes effect only once you’ve paid the rest of the debt (opens in a new tab). It also has its own voluntary disclosure (opens in a new tab) program.

Saving for next April’s tax bill, with a weekly draw on top

A plan only works if every payment clears, and next year’s taxes can come due while the plan is still running. A small cushion in your own account helps with both. Keep it small, because a collections officer can ask about your savings and a garnishment can take them. Beyond that cushion, extra money usually goes to the debt first, since 7% is more than most savings accounts pay. Our guide to paying off debt or saving first goes through the order, and if side income created the bill, our side hustle tax guide shows how much tax to expect.

Lodavo can make that cushion more fun to build. It’s a free app. You connect your savings or chequing account, and even a $200 cushion earns eight tickets in a weekly cash draw. A user wins at least $100 every week, and the top prize is $10,000. Your savings stay at your own bank, ready for the CRA’s next due date.

Once your plan is running, you can get Lodavo free on the Apple App Store (opens in a new tab) or Google Play Store (opens in a new tab).

This article is general information, not tax or legal advice. Your options depend on your income, your province and what you owe, so check the linked pages or talk to a tax professional before you act on a large debt.

Terms and conditions apply. No purchase necessary (alternate method of entry available). Skill-testing question required. Open to legal residents of Canada who are the age of majority. Odds depend on the number of eligible entries received. Full rules and odds at our contest rules.