
Every year, the deadline to file your personal income tax is April 30. If you owe on your taxes, you have until April 30 to pay without incurring any penalties or interest. But what if you can’t pay? What options do you have?
Is Not Paying Taxes a Crime in Canada?
Failing to pay your taxes due to purposely not reporting income or falsifying documents may be considered a form of willful tax evasion, which is a criminal offence. Penalties can include fines of up to 200% of the taxes evaded (on top of the taxes owing) and up to five years in prison. As you can see, not paying your taxes can come with heavy consequences, so it’s important to avoid common tax-filing mistakes.
What Are The Potential Consequences of Not Paying Taxes in Canada?
While making an innocent mistake like a late payment isn’t labelled as tax evasion, it may still incur late fees and other penalties.
As Yannick Lemay, Learning Program Lead & Tax Specialist at H&R Block noted on the Moolala: Money Made Simple podcast,
“The fact is, there are tremendous, very serious consequences for not reporting your income, that could cause, of course, penalties, interest on the amount that you owe…it can even go up to criminal charges.”
How to Avoid Common Tax-Filing Mistakes
Filing your taxes might feel daunting, but these key tips can make it less stressful in the long term:
- Give yourself enough time to complete your tax return by the deadline
- Keep track of your income and expenses throughout the year to simplify tax prep
- Use tax software like Wealthsimple or TurboTax, or a tax expert/accountant to assist your tax prep and calculations
If you have any major tax challenges, such as complicated investments or income streams, seek help early on to ensure smooth filing.
What Happens If You Don’t Pay Your Taxes
We don’t want you to find out the hard way, so we’ve outlined the consequences of failing to pay your taxes below.
Immediate Consequences of Unpaid Taxes (Penalties and Interest Charges)
There are several immediate financial repercussions if you don’t file, or pay, your taxes.
Filing your tax return after the due date with a balance owing incurs a late-filing penalty. You can avoid the late-filing penalty by filing on time, even if you can’t pay your balance. These penalties can get steeper if you’re repeatedly late.
For example, the late-filing penalty for 2024 is 5% plus an additional 1% for each full month that you file after the due date, up to 12 months. If the CRA charged you a late-filing penalty for 2021, 2022, or 2023 and requested a formal demand for a return, your 2024 late-filing penalty would be 10% of the balance owing with an additional 2% for each full month that you file after the due date, to a maximum of 20 months.
If you have a balance owing, the CRA will charge compound daily interest on any unpaid amount starting the day after the balance is due. This includes any balance owing if the CRA reassesses your return. The interest rate that the CRA charges on current or previous balances owing can change every three months based on prescribed interest rates, which can be unpredictable.
Enforcement Actions by the CRA
If you owe taxes to the CRA and don’t pay, they can arrange for part of your paycheque to go straight to the government; this is known as wage garnishment. They can even seize, freeze, and sell your assets without needing to go through the courts.
If you ignore their notices, the CRA may freeze your bank account. They can issue a legal notice called a Requirement to Pay that directs your financial institution to freeze the account and forward money directly to the CRA. You won’t be able to access your account until your tax debt is resolved.
These are drastic measures, and as such, the CRA generally tries to work with you to find alternative solutions. That’s why it’s so important not to ignore their notices and to communicate your situation with the CRA, even if you can’t pay your balance in full.
Scammers can often contact you, pretending to be from the CRA and demanding payment. Learning the warning signs of fraud will protect you. The CRA will never send refunds via text message or e-transfer, demand or pressure immediate payment, or use aggressive and threatening language.
Impact on personal finances
While the CRA doesn’t report your tax payments to credit bureaus, your credit score could be indirectly affected if there is a formal court case associated with your account.
Failing to file can also result in the suspension of benefits such as the Canada Child Benefit (CCB), GST/HST credits, and Old Age Security supplements.
Unlike private creditors, the CRA doesn’t need a court order to take any of these actions, but willful tax evasion could lead to court proceedings, including criminal charges and legal prosecution. If convicted under the Income Tax Act, you could be fined between 50% and 200% of the taxes owed or face up to five years in prison.
What to Do if You Can’t Pay Your Taxes
While some Canadians might be getting refunds or just breaking even this tax season, there are many of us who will end up owing the CRA. So, if you owe the CRA money and aren’t able to pay them, what should you do?
1. Object to the Taxes You Owe
If you disagree with your tax assessment and the amount you owe, you can object to it. You can file an objection by doing any of the following:
- Register online through My Account, a secure portal that lets you view your personal income tax and benefit information and manage your tax affairs online. Then use the “Register my formal dispute” option in your online CRA My Account.
- Sending a signed letter to your local CRA appeals centre.
- Completing and filing a Form T400A, Objection – Income Tax Act.
If you owe taxes and are unsure why, or don’t agree with the amount owed, consider contacting a tax professional to review your finances.
2. Seek Taxpayer Relief Provisions
Canadians struggling financially may be eligible for Taxpayer Relief Provisions. Provisions include cancelling or waiving interest or penalties.
The CRA provides options for Canadians who are in an emergency situation, such as a job loss or other circumstance beyond your control. These could include a pandemic like COVID-19, a natural disaster, an illness, a death in the family, or serious emotional or mental stress.
You’ll need to prove financial hardship in addition to these circumstances and that paying the CRA would make it difficult for you to afford the basic necessities of life. Plus, it’s important to understand that even if you do qualify for Taxpayer Relief Provisions, you’ll still owe your tax debt; the CRA will just waive or cancel interest and penalties.
If you cannot file your tax return by April 30 and/or make tax payments by April 30, you can request the CRA to cancel any penalties or interest by submitting a request online.
To request taxpayer relief, such as cancelling or waiving interest or penalties, you’ll need to fill out Form RC 4288 and provide all the facts and documentation supporting why you feel charges should be cancelled or waived.
3. Enroll in a CRA Tax Payment Arrangement Plan
If you can prove to the CRA that financial hardships have set you back, but that you will eventually be able to pay, you may want to try a CRA tax payment arrangement, where you make smaller payments to the CRA until you pay off all of your tax debt, plus applicable interest.
To qualify for a CRA payment arrangement, you’ll need to prove your current inability to pay. So, be prepared to share details regarding your income, expenses, assets, and liabilities. (If you need help putting a budget together, you can download our free Budget Planner.)
You typically need to have filed your tax return before you can set up a CRA payment arrangement, so it’s important to be sure to complete all forms before applying; this will also help to spare you from additional interest charges.
There are three ways to set up a payment arrangement plan with the CRA:
Online
If you’re able to make some payments toward the amount you owe, you can authorize the CRA to withdraw a specific amount directly from your bank account. To do this, you must sign up through your CRA account and set up a pre-authorized debit.
CRA’s Automated Phone Service
You can also make payment arrangements through the CRA’s automated TeleArrangement service by calling 1(866)256-1147 between 7:00 a.m. - 10:00 p.m. ET. Before you call, be sure to have your last assessed tax return in hand; you’ll need to provide the automated service with the amount entered on line 15000 during the call, along with your social insurance number and date of birth.
Speak with a CRA Agent
You can also set up a payment arrangement over the phone with a CRA agent, such as a collections officer, by calling 1(888)863-8657 between 7:00 a.m. - 8:00 p.m. EST.
4. Apply to the Voluntary Disclosures Program (VDP)
The Voluntary Disclosures Program (VDP) provides relief on a case-by-case basis to those who voluntarily come forward to fix errors or omissions in their tax filings before the CRA knows or contacts them. See the conditions for eligibility here.
If you realize that you’ve made a mistake, forgot something, or left something out, you can proactively apply to disclose things like unreported income or errors to potentially avoid penalties. If they decide that you qualify, you will still have to pay your taxes owing and interest, but you may receive relief from prosecution, and sometimes relief from penalty and partial interest.
How Long Will the CRA Give You to Pay?
You must pay your taxes by the deadline to avoid penalties, but you have options if you can’t pay your taxes on time. You could also contact the CRA to request that they waive certain fees. You may be successful if you plead your case, but only under special circumstances, such as proven financial hardship, extraordinary circumstances, or serious illness.
Tax Relief with Credit Canada
Owing money to the CRA is no fun, and while Credit Canada can’t clear your tax debts, we do offer financial assistance that can improve your ability to pay.
By entering a Debt Consolidation Program, you can free up cash to settle any taxes you owe. Plus, if you owe taxes and you sign up for a Debt Consolidation Program, it may work to your advantage if you’re trying to get on a CRA tax payment arrangement plan; it shows that you’re experiencing financial hardship, but you’re doing what you can to repay what you owe.
Through our debt consolidation programs, we can negotiate with your creditors, reduce or stop the interest on your unsecured debt (e.g., credit cards, payday loans, utility bills, etc.), and lower your monthly payments.
To learn more about your debt consolidation options or for free and confidential financial advice, give us a call at 1(800) 267-2272 or contact us online.

Frequently Asked Questions
Have a question? We are here to help.
Can you negotiate tax debt with CRA?
What is a Debt Consolidation Program?
A Debt Consolidation Program (DCP) is an arrangement made between your creditors and a non-profit credit counselling agency. Working with a reputable, non-profit credit counselling agency means a certified Credit Counsellor will negotiate with your creditors on your behalf to drop the interest on your unsecured debts, while also rounding up all your unsecured debts into a single, lower monthly payment. In Canada’s provinces, such as Ontario, these debt payment programs lead to faster debt relief!
Will Debt Consolidation hurt my credit score?
Most people entering a DCP already have a low credit score. While a DCP could lower your credit score at first, in the long run, if you keep up with the program and make your monthly payments on time as agreed, your credit score will eventually improve.
How does Debt Consolidation work?
Learn more about how debt consolidation works here.