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CRA Late Payment Penalty: What You Need to Know

The CRA late payment penalty can make it difficult to pay off what you owe. However, you can avoid CRA's late payment penalties. Farber Tax can help you get relief from CRA penalties.

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CRA Late Payment Penalty Information & What You Can Do


Most Canadians are required to file income taxes and to pay their taxes when they are due. If you do not do so, you will be charged a CRA late payment penalty. The CRA (Canada Revenue Agency) expects to be paid on time. If you file you taxes and have a balance owing, the agency will begin to charge interest starting the day after your tax return for the previous year is due. The CRA charges compound daily interest on any unpaid amounts owing.


How Much is the CRA Late Payment Penalty?


As mentioned, the CRA charges interest daily on any amount owing. The interest rate charged is set out by the CRA and it can change every three months. Interest continues to be charged on any outstanding amounts (including those from previous years) and any payments you make are first applied to the previous years’ amounts.

In addition to charging a CRA late payment penalty, you can also be charged a penalty if you do not file your returns on time. If you owe tax and do not file by the due date, you will be charged a penalty of 5% of the balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. However, if you have been charged a late-filing penalty in any of the previous three years, and file your taxes late again, this penalty can increase. In these cases, the penalty can be 10% of the most recent year’s balance owing, plus 2% of this balance owing for each full month your return is late, to a maximum of 20 months.

These amounts can clearly add up quickly and make it incredibly difficult to pay your taxes.

The best way to avoid paying a CRA late payment penalty or late filing penalty is to file your taxes on time and pay your taxes when they are due. Even if you are not able to pay your tax debt right away, you should still file on time to avoid the late-filing penalty.

However, if you have been hit with a CRA late payment penalty or filing penalty and are having difficulty paying the CRA what is owed, it’s crucial to speak with a professional.


How to Handle a CRA Late Payment Penalty


If you cannot pay your taxes when they are due, speaking with the professionals at Farber Tax Solutions is a wise choice. The CRA is incredibly tough to communicate and negotiate with. It knows that it is very powerful and, therefore, it will not accept less than is owed to it. Unlike with some other creditors, if you owe the CRA money, it will not be open to negotiating a lower payment. However, the agency may accept a payment plan if you cannot pay your taxes in full. In these cases though, you need to use caution as the CRA tends to offer very strict payment terms. Working with a professional can help you get a better arrangement.

In some situations, the CRA might even agree to waive interest and penalties. However, it’s also crucial to work with professionals in these situations as CRA processes can be very lengthy and complicated.

CRA negotiators are incredibly skilled. They know that the agency can seize your assets, freeze your bank accounts, garnish your wages, and more if you do not pay what you owe. CRA negotiators use the threat of these collection methods to influence negotiations. Working with Farber levels the playing field. Our team of legal, accounting, and ex-CRA professionals has the experience and skill needed to successfully communicate and negotiate with the CRA on your behalf, resolving tax problems. Trust our proven history of success and contact us today to find out how we can help you.

Farber Tax Solutions Helps You at Every Step of the Way including:

  • 1| Organizing: We analyze all documents and communication, to fight the CRA on your behalf
  • 2| Audits: We assist you with audits and ensure proper conduct by tax authorities
  • 3| Appeals: We can prepare a Notice of Objection, clarifying your standing with the CRA
  • 4| Litigation: We represent you at all levels of court