Oh No, You Owe

For most of us the tax filing deadline has passed, and with any luck we are expecting a refund or we have managed to pay the balance owing to CRA. What happens if we are facing a large amount due that we are unable to pay all at once?

First of all, it is always important to submit your tax return on time to avoid late filing penalties! Late filers this year are being charged compound daily interest (based upon a 5% annual rate) on amounts owing after May 2, 2011.  It is best to pay any tax owing by April 30th of each year, or the next business day if that date falls on a weekend. Even when your filing due date is later, as in the case of self-employed taxpayers, the interest clock starts ticking on the first business day after the April 30th filing deadline - May 2nd this year. The government expects you to beg, borrow or steal (well, beg or borrow anyway) to come up with the amount owing. When circumstances don't allow this, pay as much as you can then contact the CRA Debt Management Centre at 1-888-863-8657 to arrange for a payment plan.

There may be penalties when you owe CRA, especially if you have been in arrears before. Benefits such as GST payments may be withheld until your balance owing is repaid. It is wise to seek professional advice before the end of the tax year so you can plan proactively to satisfy your tax obligations. The best time to start that planning ñ right now!