How to Set Up a Tax Payment Plan in Canada: A Practical Guide
Receiving a tax bill you can't pay in full is stressful — but it doesn't have to spiral into a financial crisis. The Canada Revenue Agency (CRA) offers a structured process for Canadians who need more time to settle their tax debt. Knowing how to set up a tax payment plan puts you in control of the situation rather than waiting for collection action to begin.
This guide walks you through the CRA's payment arrangement process, what to expect during the application, how interest and penalties work, and why having a financial advisor in your corner makes the process significantly more manageable. Whether you're dealing with personal income tax, business tax, or GST/HST arrears, this is the practical roadmap you need.
Key Takeaways
The CRA allows taxpayers to set up payment arrangements when they cannot pay their full balance immediately.
Interest continues to accrue on unpaid balances at the prescribed CRA interest rate, even during an active payment plan.
You must file all outstanding returns before the CRA will consider a payment arrangement.
The CRA evaluates your income, assets, and expenses to determine an acceptable payment schedule.
Acting quickly reduces penalties and demonstrates good faith — which matters during CRA negotiations.
A licensed financial advisor can help you structure your finances to meet payment obligations and avoid future tax debt.
Overview
This guide covers everything you need to know about setting up a tax payment plan with the CRA in Canada. We explain who qualifies, what information the CRA requires, how to contact them, what a realistic payment schedule looks like, and what happens if you miss payments. We also address the financial planning side — because a payment plan is only one part of resolving tax debt. By the end, you'll know exactly how to approach the CRA, what to prepare, and how professional financial guidance from Athena Financial Inc. can support you through the process and beyond.
What Is a CRA Tax Payment Plan?
A CRA tax payment arrangement is a formal agreement between you and the Canada Revenue Agency that allows you to pay your outstanding tax balance over time through scheduled installments. It is not a debt forgiveness program — the full amount owed, plus interest, remains payable. But it prevents immediate collection action and gives you a structured, manageable path to resolving the debt.
Payment arrangements are available for most types of CRA debt, including:
Personal income tax balances
Corporate tax arrears
GST/HST amounts owing
Payroll source deductions
Benefit overpayments
The CRA considers each request individually. There is no automatic approval — the agency reviews your financial situation and determines what payment schedule is realistic based on what you can genuinely afford.
According to the CRA's official guidance on payment arrangements, the agency prefers arrangements that resolve the debt as quickly as possible while remaining within the taxpayer's financial means.
Step 1: File All Outstanding Tax Returns First
Before the CRA will discuss a payment arrangement, all outstanding returns must be filed. This is non-negotiable. The CRA will not negotiate a payment plan for a debt that hasn't been fully assessed.
If you have unfiled returns from previous years, file them immediately — even if you can't pay what you owe. Filing late is always better than not filing. Failing to file triggers additional penalties on top of the interest already accruing on unpaid balances. The failure-to-file penalty is 5% of the balance owing for the year, plus 1% for each full month the return remains unfiled, up to a maximum of 12 months.
Once all returns are filed and your balance is confirmed, you're in a position to formally request a payment arrangement.
Step 2: Understand What You Owe — Including Interest
Before contacting the CRA, get a clear picture of your total outstanding balance. This includes:
Principal tax debt — the original amount assessed
Arrears interest — charged daily at the CRA's prescribed rate (currently the applicable quarterly rate, compounded daily)
Late-filing penalties — if applicable
Instalment penalties — if you failed to make required quarterly tax instalments
The CRA's prescribed interest rate on overdue taxes is tied to the Bank of Canada rate and adjusted quarterly. For 2024 and into 2025, this rate has been elevated compared to historical norms. Interest compounds daily, meaning the longer a balance remains unpaid, the faster it grows.
You can view your current balance through your My Account on the CRA's online portal, or by calling the CRA directly. Having an accurate, itemized picture of what you owe is essential before entering any payment discussion.
Step 3: Assess Your Financial Position
The CRA will ask you to demonstrate that you genuinely cannot pay the full balance immediately. To evaluate this, they typically review:
Monthly income — employment income, self-employment earnings, rental income, pension, benefits
Monthly essential expenses — housing, utilities, food, transportation, childcare
Assets — savings accounts, investments, real estate, vehicles
Existing debts — mortgages, loans, credit card balances
The CRA expects you to have explored all reasonable options before requesting a payment plan. This includes using available savings, liquidating non-essential assets, or borrowing from a financial institution. If you have significant accessible assets, the CRA may expect you to apply them toward your balance before approving an extended arrangement.
Preparing a clear, honest summary of your financial position before contacting the CRA strengthens your case and speeds up the process. This is also where working with a financial advisor becomes particularly valuable — they can help you present your finances clearly and identify resources you may not have considered.
Step 4: Contact the CRA to Request a Payment Arrangement
Once your returns are filed and your financial picture is clear, contact the CRA to formally request a payment arrangement. There are two primary methods:
Online Through My Account
The CRA's My Account portal allows individuals to set up payment arrangements online for certain types of debt. This is the fastest option for straightforward cases where the balance is clear and your proposed payment amount is reasonable.
By Phone
For more complex situations — business tax debt, large balances, or cases involving penalties — calling the CRA's Collections department directly is the better approach. For individuals, call 1-888-863-8657. For businesses, call 1-877-548-6016.
When you call, have the following ready:
Your Social Insurance Number (SIN) or Business Number (BN)
A complete list of your income, expenses, and assets
Your proposed monthly payment amount
Your preferred payment start date
The CRA agent will review your financial information and either accept your proposed arrangement, suggest a different schedule, or request additional documentation.
Step 5: Agree on a Payment Schedule and Set Up Payments
Once the CRA accepts your arrangement, you'll agree on a payment amount, frequency, and start date. Common payment frequencies include monthly, bi-weekly, or weekly. The CRA generally prefers the shortest arrangement that remains within your means — they are not inclined to approve a 5-year plan when a 12-month arrangement is feasible.
Approved payment methods include:
Pre-authorized debit — the most reliable option, reduces the risk of missed payments
Online banking — paying the CRA as a payee through your bank
My Payment — the CRA's online payment portal
Cheque or money order — mailed to the CRA (slower and less reliable)
Pre-authorized debit is strongly recommended. Missing a single payment can trigger the CRA to cancel the arrangement and resume collection action — including wage garnishment, bank account freezes, or liens on property.
What Happens If You Miss a Payment?
Missing a payment under an active CRA arrangement is serious. The CRA treats missed payments as a breach of the agreement, which can lead to:
Cancellation of the payment arrangement
Resumption of active collection — including legal enforcement actions
Additional interest continuing to compound on the full balance
Reduced goodwill in future negotiations if you need to renegotiate
If your financial situation changes and you can't make a scheduled payment, contact the CRA proactively before the payment is missed. The agency is far more willing to adjust an arrangement for a taxpayer who communicates in advance than one who simply stops paying without notice.
The Role of the Taxpayer Relief Program
If your tax debt includes penalties or interest that resulted from circumstances beyond your control — serious illness, natural disaster, job loss, or CRA processing errors — you may qualify for taxpayer relief. Under this program, the CRA has discretion to waive or cancel interest and penalties in qualifying situations.
Taxpayer relief does not eliminate the principal tax debt, but it can meaningfully reduce the total amount owing. Applications are submitted using CRA Form RC4288 and require detailed documentation of the circumstances that led to the debt.
This is a separate process from a payment arrangement — but the two can be pursued simultaneously. A financial advisor can help you assess whether you qualify and prepare a strong application.
How a Financial Advisor Supports Tax Debt Resolution
Setting up a CRA payment plan is a process you can initiate on your own. But resolving tax debt effectively — and preventing it from recurring — requires a broader financial strategy.
A licensed financial advisor helps you:
Restructure cash flow to meet payment obligations without compromising essential expenses
Identify tax-sheltering strategies — such as RRSP contributions — that reduce future tax liabilities
Review withholding and installment obligations to prevent future arrears from accumulating
Coordinate with other professionals — accountants and tax lawyers — when situations are complex
Build a financial plan that addresses the root causes of tax debt, not just the immediate balance
Tax debt rarely exists in isolation. It's often a symptom of broader cash flow challenges, inadequate financial planning, or insufficient awareness of tax obligations — all areas where professional guidance creates lasting improvement.
Athena Financial Inc. works with individuals and business owners across Ontario and British Columbia to build financial plans that address both immediate tax challenges and long-term financial stability. Understanding how investment vehicles like RRSP or TFSA accounts factor into your tax picture is one area where professional advice pays for itself quickly. Business owners managing corporate tax obligations may also benefit from reviewing corporate life insurance tax strategies as part of a broader tax-efficiency plan.
Take Control of Your Tax Situation Today
If you're carrying CRA debt and need help structuring a path forward, Athena Financial Inc. is here to help. Serving clients across Ontario and British Columbia, the Athena Financial team provides financial planning guidance that helps you manage tax obligations, protect your income, and build long-term stability. Call +1 604-618-7365 today to speak with a licensed advisor who can help you set up a tax payment plan that works — and build a financial strategy that prevents the next one from ever being necessary.
Common Questions About How to Set Up a Tax Payment Plan
Q: Can anyone set up a tax payment plan with the CRA in Canada?
A: Most Canadian taxpayers who owe a balance to the CRA and cannot pay in full immediately are eligible to request a payment arrangement. However, all outstanding tax returns must be filed before the CRA will consider an arrangement. The CRA evaluates each request individually based on the taxpayer's income, expenses, and assets to determine a realistic and acceptable payment schedule.
Q: Does the CRA charge interest during a payment plan?
A: Yes. Interest continues to accrue on your outstanding balance throughout the duration of a payment arrangement. The CRA charges arrears interest at its prescribed rate, compounded daily, until the full balance is paid. This makes it financially advantageous to pay as much as possible as quickly as possible — a longer arrangement costs more in total interest over time.
Q: How long can a CRA tax payment plan last?
A: The CRA prefers arrangements that resolve the debt in the shortest timeframe that remains within the taxpayer's financial means. There is no fixed maximum duration, but the agency is unlikely to approve an arrangement spanning several years if your financial position allows for faster repayment. Most arrangements are structured to resolve the balance within 12 to 24 months for manageable debt levels.
Q: What happens if the CRA rejects my payment arrangement request?
A: If the CRA rejects your proposed arrangement — typically because they believe you can pay more quickly — you can provide additional documentation of your financial situation or propose a revised payment amount. If you believe the CRA's assessment is unreasonable, you can escalate the matter or seek assistance from a financial advisor or tax professional who can negotiate on your behalf with a clearer financial picture.
Q: Can I set up a CRA payment plan online without calling?
A: Yes, for certain types of personal income tax debt, the CRA's My Account portal allows you to set up a payment arrangement online. This is the most convenient option for straightforward cases. For business tax debt, large balances, complex situations involving penalties, or cases where your proposed payment amount may require negotiation, calling the CRA's Collections department directly is the more effective approach.
Q: Will setting up a payment plan with the CRA affect my credit score?
A: A CRA payment arrangement itself is not reported to credit bureaus and does not directly affect your credit score. However, if the CRA registers a tax lien against your property due to unresolved debt, that lien may appear in public records and affect your ability to access credit. Resolving your tax debt through a payment arrangement prevents escalation to enforcement actions that could have broader financial consequences.
Q: Can the CRA garnish my wages if I have a payment arrangement?
A: If you have an active, compliant payment arrangement in place, the CRA generally will not pursue enforcement actions such as wage garnishment or bank account freezes. However, missing payments or failing to maintain the arrangement can lead the CRA to cancel it and resume collection action. Acting proactively and maintaining your payment schedule is the most effective way to prevent enforcement.
Q: Can I apply for taxpayer relief at the same time as a payment arrangement?
A: Yes. Taxpayer relief — which allows the CRA to waive or cancel penalties and interest in qualifying circumstances — can be pursued simultaneously with a payment arrangement. The two processes are separate. A taxpayer relief application addresses the penalties and interest on your account, while the payment arrangement addresses repayment of the principal balance. Both are worth exploring if your debt includes significant penalty and interest charges.
Q: What financial information does the CRA ask for when setting up a payment plan?
A: The CRA typically asks for a summary of your monthly income from all sources, your essential monthly expenses, details of your assets including savings and investments, and your existing debt obligations. They use this information to assess your capacity to pay and determine an appropriate payment schedule. Preparing this information clearly and accurately before contacting the CRA speeds up the process and supports a more favourable outcome.
Q: How can a financial advisor help me if I owe taxes to the CRA?
A: A financial advisor helps you beyond just the immediate payment plan. They can restructure your cash flow to meet CRA obligations, identify tax-sheltered investment strategies to reduce future tax liabilities, review your installment obligations to prevent future arrears, and coordinate with accountants or tax professionals for complex situations. Addressing the financial habits and planning gaps that led to tax debt creates lasting improvement — not just a temporary fix.
Conclusion
A CRA tax debt doesn't have to define your financial future — but it does require prompt, informed action.
Knowing how to set up a tax payment plan gives you a clear, structured path forward. File your returns, understand your balance, assess your finances honestly, contact the CRA with a realistic proposal, and maintain every payment you commit to. Each step builds good faith with the agency and keeps collection action at bay.
But resolving tax debt is only part of the equation. The financial habits, planning gaps, and cash flow challenges that contributed to the debt in the first place deserve equal attention. That's where professional financial guidance transforms a stressful situation into a genuine turning point.
Athena Financial Inc. helps Canadians across Ontario and British Columbia manage tax obligations, build stronger financial foundations, and plan for a future where tax debt is the exception — not the pattern.
This content was developed with professional financial expertise and reviewed for accuracy. For personalized advice, consult a licensed financial advisor or tax professional.