CRA Tax Owing: Interest, Collections Limit, and Relief Options

If you have CRA tax owing after April 30, interest starts compounding daily the very next day at the prescribed rate (7% for the first two quarters of 2026), and if you also filed late, a separate penalty of up to 17% of the unpaid balance is added on top.¹² You still have real options: a payment arrangement, a taxpayer relief request to cancel penalties and interest, or, if the debt is unmanageable, a consumer proposal or bankruptcy. What you should not do is ignore it, because the CRA can garnish wages and freeze bank accounts without going to court.

What the Debt Costs You While It Sits

Interest on a CRA balance compounds daily. Section 248(11) of the Income Tax Act requires it, and the clock starts on your balance-due day and doesn’t stop until the CRA receives full payment.³⁴ The rate is set quarterly. For both Q1 and Q2 of 2026, overdue personal income tax carries a 7% rate.¹ Because compounding is daily and hits both the tax and any penalties already assessed, even a partial payment made early is worth more than the same payment made later.

Filing your return late adds a separate penalty under section 162(1): 5% of the tax owed at the filing deadline, plus 1% for each full month the return remains outstanding, up to 12 months. That maxes out at 17% of your unpaid balance. Repeat late filers get hit harder. If you were penalized for late filing in any of the three preceding years and the CRA sent you a formal demand to file, the opening penalty doubles to 10% and the monthly addition doubles to 2%, running up to 20 months, for a possible 50% of the unpaid balance.²

The practical rule: file on time even if you can’t pay. The late-filing penalty applies only to the unpaid portion, so filing on time eliminates it entirely, and you’ll still owe only the tax plus interest.

Checking Your Balance

The fastest way to see what you owe is the CRA’s My Account portal. Sign in and select “Accounts and payments” to view your current balance, pending payments, and any instalment details.⁵ The balance shown includes interest accrued to that date, and it updates after each Notice of Assessment or Reassessment. Allow a few business days after a recent filing or payment for the number to catch up. If you’d rather speak to someone, the individual tax enquiries line is 1-800-959-8281.⁶

Ways to Pay

The CRA charges no government processing fee for direct payment. Your options:

Online banking. Add “Canada Revenue Agency” as a bill payee through your bank, using your nine-digit Social Insurance Number as the account.
My Payment. The CRA’s own portal accepts Visa Debit and Debit Mastercard for immediate processing. Credit cards and Interac Debit are not accepted through this service.⁷
Pre-authorized debit. Set up automatic withdrawals from your chequing account on dates you pick. Useful when you’re on a payment plan.
In person. Use a personalized remittance voucher to pay at your bank or a Canada Post outlet.

Credit cards work only through third-party processors that charge roughly 2% to 2.5% as a convenience fee. Whether that’s worth it depends on any card rewards you’d earn and whether you’d carry the balance, since credit card interest rates run far higher than the CRA’s 7%.

Setting Up a Payment Arrangement

If you can’t pay the full amount now, the CRA will negotiate a payment schedule. The agency expects you to have first looked at other funding, such as a line of credit or personal loan, and it will ask for financial details: monthly income, recurring expenses like housing and utilities, assets including property equity, and existing debts like credit cards and car loans.

For personal income tax, the CRA runs an automated line at 1-866-256-1147 where you can propose an arrangement without speaking to an agent.⁸ Larger or more complex balances get routed to a collections officer. One thing to keep in mind: a payment arrangement stops collection action, but it does not freeze interest. The daily compounding continues on whatever balance remains until the last payment clears.

Getting Penalties and Interest Cancelled

The CRA has discretion under subsection 220(3.1) of the Income Tax Act to cancel or waive penalties and interest, and it can go back up to 10 calendar years after the end of the tax year in question.⁹ Three grounds are recognized: extraordinary circumstances such as a natural disaster or serious illness, delays or errors caused by the CRA itself, and genuine financial hardship that made payment impossible.¹⁰

You submit the request through My Account or on Form RC4288, with supporting documents: medical records, proof of a disaster, correspondence showing CRA delays, or detailed financial statements.¹¹ Relief is discretionary, not automatic, and requests that come down to forgetfulness or cash-flow preferences get denied. A legitimate application, though, can wipe out thousands in accumulated penalties and interest while leaving only the original tax payable. If you have grounds, apply before the 10-year window closes.

What the CRA Can Do to Collect

The CRA does not need a court order to garnish your income or seize a bank account. Section 224 of the Income Tax Act lets the agency issue a Requirement to Pay directly to your employer, your bank, or anyone else who owes you money.¹² An employer that receives one is legally required to redirect a portion of your pay. For a bank account, the CRA can demand the entire balance up to the amount of the debt. These notices stay in force until the debt is paid or the CRA withdraws them.

Before garnishment, the CRA usually starts by redirecting money it already owes you. GST/HST credits, Canada Child Benefit payments, and income tax refunds get applied automatically to your outstanding balance, and the offset program also reaches debts to other federal programs like Employment Insurance overpayments and Canada Student Loans.¹³ You won’t get an individual notice each time; the credit simply arrives smaller than expected, or not at all.

For larger or long-running debts, the CRA can register a certificate in Federal Court under section 223. Once registered, that certificate has the same legal effect as a court judgment.¹⁴ The CRA can then file it against your property in any province, creating a lien that blocks a sale or refinance until the debt is resolved. A lien on your home doesn’t trigger an immediate forced sale, but it ensures the CRA gets paid from the proceeds whenever the property changes hands.

The 10-Year Collections Limit (and How It Resets)

The CRA does not have unlimited time to collect. For personal and corporate income tax, the limitation period is 10 years, starting on the 91st day after a Notice of Assessment or Reassessment is sent.¹⁵ After that, the CRA can no longer take legal action to collect.

The trap is that ordinary actions restart the clock. The 10-year period resets from the date you:

Make a voluntary payment
Write to the CRA proposing a payment arrangement
Provide written acknowledgement of the debt
File a notice of objection or an appeal
Ask the CRA about setting up pre-authorized debit payments
Request a reassessment in writing

Each one gives the agency a fresh decade.¹⁵ A casual call to “discuss options” or a small good-faith payment can extend the CRA’s reach by another ten years. If your debt is old and the limitation period is close to expiring, get professional advice before contacting the CRA.

When the Debt Is Too Big: Insolvency

Formal insolvency can include CRA obligations. In a consumer proposal, tax debt is treated as unsecured, provided the CRA has not already registered a lien against your property. A licensed insolvency trustee negotiates with all your creditors, including the CRA, to settle for less than the full amount. Penalties and interest are typically reduced or eliminated, and you make fixed monthly payments over a set period of up to five years.

Bankruptcy also discharges most tax debt, though the consequences for your credit and assets are more significant. If the CRA holds a secured claim through a registered lien, that portion survives both a consumer proposal and bankruptcy to the extent of the secured interest. Before choosing either path, sit down with a licensed insolvency trustee who can assess whether your debt qualifies and which route fits your situation.

1
Canada Revenue Agency. Interest Rates for the First Calendar Quarter
2
Justice Laws Website. Income Tax Act – Section 162
3
Justice Laws Website. Income Tax Act – Section 248
4
Justice Laws Website. Income Tax Act – Section 161
5
Canada Revenue Agency. Confirm a Payment – Payments to the CRA
6
Canada Revenue Agency. Contact the CRA
7
Canada Revenue Agency. Pay With a Debit Card Through the CRA’s My Payment Service
8
Canada Revenue Agency. Arrange to Pay Your Debt Over Time – Payments to the CRA
9
Justice Laws Website. Income Tax Act – Section 220
10
Canada Revenue Agency. Taxpayer Relief Provisions
11
Canada Revenue Agency. RC4288 Taxpayer Relief Request – Cancel or Waive Penalties and Interest
12
Justice Laws Website. Income Tax Act – Section 224
13
Canada Revenue Agency. How Payments Are Applied to Offset Debt
14
Justice Laws Website. Income Tax Act – Section 223
15
Canada Revenue Agency. How Long a Debt Can Be Collected by the CRA