Prescribed Interest Rates Rises in First Quarter of 2023

Advisors should identify clients who have balances owing to the CRA as soon as possible in the new year to ensure they pay off their balance due and if they cannot, to advise on the most tax-efficient way to eliminate this expensive debt.  Interest costs accrue daily at the current prescribed rate plus 4%.  The new rates in effect from January 1, 2023 to March 31, 2023 will increase the cost of a debt to CRA significantly:

Prescribed Interest Rates First Quarter 2023:

• 8% - The interest rate charged on overdue taxes, Canada Pension Plan contributions, and employment insurance premiums
• 8% - The interest rate for corporate taxpayers’ pertinent loans or indebtedness
• 6% - The interest rate to be paid on non-corporate taxpayer overpayments
• 4% - The interest rate to be paid on corporate taxpayer overpayments
• 4% - The interest rate used to calculate taxable benefits for employees and shareholders from interest‑free and low-interest loans  

Bottom Line – With inflation and high interest rates, a crushing tax debt and significantly crimp financial choices in 2023.  Eliminate tax debt with withdrawals from tax exempt funds – like the TFSA or non-registered accounts that have cash balances.  CRA will garnishee wages or remove property in settlement of a tax debt, so be sure to help negotiate payment terms with the collections officer.  

Evelyn Jacks is Founder and President of Knowledge Bureau, holds the RWM™, MFA ™, MFA-P™ and DFA-Tax Services Specialist designations and is the best-selling author of 55 books on tax filing, planning and family wealth management.  Follow her on twitter @evelynjacks.

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