Each year, the due date for payment of all income tax amounts owed for the previous year falls on April 30. In 2020, however, that payment deadline has been something of a moving target. Earlier this year, the federal government, in recognition of the financial disruption and hardship caused by the pandemic, extended the payment deadline by four months, to September 1, 2020. In mid-September that date was extended again, such that all individual income taxes owed for 2019 were due and payable by Wednesday September 30. There has been no further extension.
Each year, for any number of reasons, there are taxpayers who cannot pay the tax amount they owe by the required deadline. This year, that number is likely to be higher than usual, because many Canadians have suffered a loss in income as the result of the pandemic and, for many, income has not returned to pre-pandemic levels. As well, benefits payable under the federal government’s major individual income replacement program — the Canada Emergency Response Benefit — came to an end at roughly the same time that final tax payments were due on September 30.
Where a taxpayer is unable, owing to financial difficulties, to pay their final tax balance as required, the Canada Revenue Agency (CRA) is willing to enter into a payment arrangement. Under such an arrangement, the outstanding amount owed can be paid over time, as the taxpayer’s financial circumstances allow.
There are two avenues available to taxpayers who want to avail themselves of such a payment arrangement. The first is a call to the CRA’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide his or her social insurance number, date of birth, and the amount entered on line 15000 of the last tax return for which the taxpayer received a Notice of Assessment. (For taxpayers who are up to date on their tax filings, that will likely be the Notice of Assessment for the return for the 2018 tax year, or perhaps 2019, depending on when the return for 2019 was filed). The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m. EST.
Taxpayers who would rather speak directly to a CRA employee can call the CRA’s debt management call centre at 1-888-863-8657, or can complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.
The CRA also provides on online tool, in the form of a payment arrangement calculator (available at https://apps.cra-arc.gc.ca/ebci/recc/pac/prot/welcome?request_locale=en_CA), which allows the taxpayer to calculate different payment proposals, depending on his or her circumstances). That calculator includes interest charges since, no matter what payment arrangement is made, the CRA will levy interest charges on any amount of tax owed for the 2019 tax year which is not paid on or before September 30, 2020. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates. For the fourth quarter of 2020 (October 1 to December 31), that rate is 5%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing in order to pay any taxes owing by the September 30 deadline.
Taxpayers who are unable to pay their taxes on time are sometimes inclined to simply put off dealing with the problem, but that’s not a good strategy. Where amounts are owed, payment has not been made and no payment arrangement has been entered into, the CRA will ultimately commence collection actions. Where a taxpayer has communicated with the CRA with respect to the outstanding debt and reached an agreement on eventual payment, such collection action (and the possible repercussions to the taxpayer’s financial standing and credit rating) can be avoided.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.