Canada Taxes: Set Up A Repayment Plan

Nick Leason

-Oct 15, 2025

Are you a Canadian taxpayer struggling to pay your taxes? A tax repayment plan might be the solution. This guide explains how to set up a plan with the CRA, making your tax obligations manageable.

Key Takeaways

A tax repayment plan allows you to pay your outstanding taxes in smaller, more manageable installments.
The Canada Revenue Agency (CRA) offers this option to taxpayers who cannot afford to pay their taxes in full.
Interest accrues on the outstanding balance, so minimizing the repayment period is crucial.
You can apply for a repayment plan online, by phone, or by mail.
Maintaining communication with the CRA and adhering to the agreed-upon terms is essential.

Introduction

Dealing with tax debt can be stressful. Many Canadians find themselves in situations where they cannot pay their taxes on time. Fortunately, the Canada Revenue Agency (CRA) offers a tax repayment plan, also known as a payment arrangement, to help ease this burden. This option allows taxpayers to break down their outstanding tax debt into smaller, more manageable payments over time. This comprehensive guide will walk you through everything you need to know about setting up a tax repayment plan in Canada, including eligibility, the application process, and how to ensure the plan works for you.

What & Why: Understanding CRA Tax Repayment Plans

What is a Tax Repayment Plan?

A tax repayment plan is an agreement between you and the CRA that allows you to pay your outstanding tax debt in installments. Instead of a lump-sum payment, you can make regular payments over a set period. This can significantly reduce financial stress and help you avoid more serious consequences of tax debt, such as legal action or wage garnishment. The CRA assesses each case individually, considering your financial situation, the amount of debt, and your ability to pay.

Why Consider a Repayment Plan?

Manageable Payments: The primary benefit is the ability to spread out your tax debt into smaller, predictable payments that fit your budget.
Avoid Penalties and Legal Action: By setting up a repayment plan, you demonstrate your commitment to paying your taxes, which can help you avoid further penalties and legal actions.
Maintain Good Standing with the CRA: A repayment plan helps you stay in good standing with the CRA, which is important for future tax filings and other financial matters.
Reduce Stress: Knowing you have a plan in place to address your tax debt can significantly reduce financial stress and improve your overall well-being.

Potential Risks and Considerations

While a tax repayment plan can be beneficial, there are a few potential drawbacks to consider:

Interest Accrual: The CRA charges interest on outstanding tax debt, which means the total amount you owe will increase over time. The current interest rates can be found on the CRA website. It's crucial to pay off the debt as quickly as possible to minimize interest charges.
Financial Assessment: The CRA will assess your financial situation to determine your ability to pay, which might involve providing detailed financial information.
Potential for Collection Actions: If you fail to adhere to the repayment plan terms, the CRA may take further collection actions, such as wage garnishment or seizing assets.

How-To: Setting Up a Tax Repayment Plan with the CRA

Setting up a tax repayment plan with the CRA involves several steps. Here’s a detailed guide to help you through the process:

1. Determine Your Eligibility

Before applying for a repayment plan, ensure you meet the eligibility criteria. Generally, you are eligible if you:

Have filed all required tax returns.
Owe an outstanding tax debt.
Are unable to pay your tax debt in full.

2. Gather Necessary Information

To apply for a repayment plan, you will need to provide the CRA with specific information, including:

Social Insurance Number (SIN): Your SIN is required for identification purposes.
Tax Returns: Copies of the tax returns for the years you owe taxes.
Financial Information: Detailed information about your income, expenses, assets, and liabilities. This might include pay stubs, bank statements, and other financial documents.
Amount Owed: The exact amount of tax debt you owe, including any penalties and interest.

3. Contact the CRA

You can apply for a tax repayment plan in several ways:

Online: The easiest way to apply is through the CRA’s My Account portal. If you don't have an account, you can register on the CRA website.
Phone: You can call the CRA’s individual tax inquiries line or the business tax inquiries line, depending on the nature of your tax debt. The phone numbers are available on the CRA website.
Mail: You can send a written request to the CRA outlining your situation and requesting a repayment plan. The mailing address can be found on the CRA website.

4. Submit Your Application

When applying, you will need to provide the information you gathered in Step 2. Be prepared to explain why you cannot pay your taxes in full and propose a repayment schedule that you can realistically manage. The CRA will review your application and financial information to determine if a repayment plan is feasible. — Richmond Hill, GA: Zip Codes & More

5. Negotiate the Terms

The CRA will assess your financial situation and propose a repayment plan. This might involve negotiating the payment amount, frequency, and duration. Be prepared to discuss your financial situation openly and honestly. The CRA is more likely to approve a plan that is realistic and sustainable.

6. Finalize the Agreement

Once you and the CRA agree on the terms, you will receive a formal agreement outlining the details of the repayment plan. Make sure to read the agreement carefully and understand your obligations. This includes the payment schedule, the interest rate, and any other conditions.

7. Adhere to the Repayment Plan

It is crucial to adhere to the terms of the repayment plan. Make your payments on time and in the agreed-upon amount. If you experience any changes in your financial situation that might affect your ability to pay, contact the CRA immediately to discuss your options. Failure to adhere to the plan can result in the CRA taking further collection actions.

Examples & Use Cases

To illustrate how a tax repayment plan works, consider these examples:

Example 1: Individual Tax Debt

John owes $10,000 in income taxes. He lost his job and is currently unemployed. He contacts the CRA and provides his financial information. The CRA assesses his situation and agrees to a repayment plan of $200 per month for 50 months. This allows John to manage his tax debt while he looks for new employment. — Pikesville, Maryland: A Comprehensive Guide

Example 2: Small Business Tax Debt

Sarah owns a small business and owes $15,000 in payroll taxes. Her business experienced a downturn, and she couldn’t pay the taxes on time. She applies for a repayment plan, and the CRA agrees to a plan of $300 per month for 50 months. This helps Sarah keep her business afloat while addressing her tax obligations.

Example 3: Self-Employed Tax Debt

Mark is self-employed and owes $8,000 in income taxes. He had unexpected medical expenses and couldn’t pay his taxes. He contacts the CRA, and they agree to a repayment plan of $150 per month for approximately 53 months. This arrangement allows Mark to manage his debt while continuing his self-employment.

Best Practices & Common Mistakes

To make the most of your tax repayment plan and avoid potential issues, consider these best practices and common mistakes:

Best Practices

File Your Taxes on Time: Filing your taxes on time, even if you can’t pay, is crucial. This can help you avoid penalties and interest.
Communicate with the CRA: If you are struggling to pay your taxes, contact the CRA as soon as possible. The sooner you reach out, the more options you will have.
Be Honest and Transparent: Provide accurate and complete information to the CRA. Honesty is essential for negotiating a realistic repayment plan.
Track Your Payments: Keep a record of your payments to ensure you are meeting your obligations.
Seek Professional Advice: If you are unsure about the process or need help with your finances, consider seeking advice from a tax professional or financial advisor.

Common Mistakes

Ignoring the Problem: Ignoring your tax debt will only make the situation worse. Penalties and interest will continue to accrue, and the CRA may take collection actions.
Providing Inaccurate Information: Providing false or misleading information to the CRA can have serious consequences, including penalties and legal action.
Overcommitting: Don’t agree to a repayment plan that you can’t realistically afford. This can lead to default and further issues.
Missing Payments: Missing payments can result in the CRA revoking the repayment plan and taking further collection actions.
Not Seeking Help: Trying to navigate the process alone can be overwhelming. Don’t hesitate to seek help from a tax professional or financial advisor.

FAQs About Canada Tax Repayment Plans

1. Who is eligible for a tax repayment plan?

You are generally eligible if you have filed all required tax returns, owe an outstanding tax debt, and cannot pay your tax debt in full.

2. How do I apply for a tax repayment plan?

You can apply online through the CRA’s My Account portal, by phone, or by mail. — Eagles Game Today: Time, Schedule, And How To Watch

3. What information do I need to provide when applying?

You will need to provide your SIN, tax returns, financial information (including income, expenses, assets, and liabilities), and the amount you owe.

4. Will I be charged interest on the outstanding tax debt?

Yes, the CRA charges interest on outstanding tax debt. The interest rate is set quarterly and can be found on the CRA website.

5. What happens if I miss a payment?

Missing payments can result in the CRA revoking the repayment plan and taking further collection actions, such as wage garnishment or seizing assets. Contact the CRA immediately if you anticipate missing a payment.

6. Can I change the terms of my repayment plan?

If your financial situation changes, you can contact the CRA to discuss adjusting the terms of your repayment plan. Be prepared to provide updated financial information.

7. How long can a tax repayment plan last?

The duration of a tax repayment plan depends on your financial situation and the amount of debt owed. The CRA will work with you to establish a realistic repayment schedule.

8. Is a tax repayment plan the same as tax forgiveness?

No, a tax repayment plan is not the same as tax forgiveness. You are still responsible for paying the full amount of your tax debt, but the plan allows you to do so in installments. In very specific circumstances, the CRA may grant tax relief, but this is a separate process.

Conclusion with CTA

Setting up a tax repayment plan with the CRA can provide much-needed relief if you're struggling to manage your tax debt. By understanding the process and adhering to the terms, you can regain control of your finances and avoid further complications. If you have outstanding tax debt and are unable to pay it in full, consider applying for a tax repayment plan today. Visit the CRA website or contact them directly to explore your options and take the first step towards financial stability.

Last updated: October 26, 2023, 16:33 UTC