How Much Interest Does CRA Charge on Unpaid Taxes? Understanding Your Payment Options

The Canada Revenue Agency (CRA) is a federal organization responsible for administering tax laws, delivering social and economic benefits, and ensuring compliance with Canada's tax legislation. Among the various operations of the CRA, one essential aspect is handling unpaid taxes. If you owe taxes and do not pay them on time, you are subject to interest charges and possibly additional penalties.

In this article, we will help you understand how much interest the CRA charges on unpaid taxes and the various payment options you have — through the official website, mobile app, and call centre. Gain a comprehensive understanding of the process to determine the ideal course of action for you.

How Much Interest Does CRA Charge on Unpaid Taxes?

The CRA charges compound daily interest on any unpaid tax balance starting from the day after your tax payment is due until the date your payment is received. The interest rate is not static; instead, it changes every three months in accordance with rates set by the federal government.

Notably, if the CRA owes you a refund on your income tax for the current year, and you still have unpaid taxes from the previous year, they may keep your refund and apply it against your tax debt. If your refund does not cover your total tax debt, they will still charge interest on the remaining amount.

Online Payment Option: The CRA Website

One of the known methods to pay your tax is through the CRA's website. Go to "My Payment" — an electronic payment service provided by the CRA that uses Visa Debit, Debit MasterCard, or Interac Online for payments directly from your bank account to the CRA.

Additionally, you can also pay using the pre-authorized debit option in My Account or by setting up a payment plan through My Account.

Mobile App Payment Option: MyCRA app

The CRA also offers the MyCRA app as a mobile payment platform for taxpayers. It’s a secure, easy-to-use mobile app that lets you access your tax information, make a payment, check the status of your return, view your notice of assessment, set up direct deposit, and receive the Canada Child Benefit, among other services.

Telephone Payment Option: CRA Call Centre

If you prefer to handle tax-related matters over the phone, the CRA's call centre can assist you. You can make your payment through Telephone Banking, which is a service provided by your financial institution. Similarly, you can use the CRA’s TeleArrangement service to set up a pre-authorized debit agreement.

While late payment of taxes can result in penalties and interest charges, the CRA offers multiple methods to facilitate tax payment. By using the method that suits you best, either the website, mobile app, or call centre, you can ensure timely payment of your taxes and avoid additional charges.

Remember, when it comes to dealing with unpaid taxes, the sooner the better. Late fees and interests can quickly add up, making the original amount even more daunting. Do not underestimate the importance of being proactive about your financial obligations to the CRA.

In Conclusion

Maintaining a clean tax record with the CRA is not only crucial for your financial stability, but it also reflects on your financial integrity. Understanding the interest charges on unpaid taxes and diligently using the appropriate payment platforms ensures you maintain a good financial standing.