In this guide
What is a CRA payment plan?
A Canada Revenue Agency (CRA) payment arrangement is an agreement to pay your tax debt over time, in amounts you agree with the CRA instead of all at once.
A CRA payment arrangement lets you pay your tax debt over time in amounts you agree with the CRA instead of all at once. While the CRA calls it a payment arrangement, it is commonly known as a payment plan. This option gives you more time to pay but doesn’t reduce the total amount owed.
The CRA does not reduce the principal, and interest continues to compound daily until the debt is paid off. A payment arrangement is suitable for a temporary shortfall that you can manage over a few months or a year, rather than for a debt that exceeds what your income can cover.
How to set up a payment arrangement with the CRA
There are three ways to set up a payment arrangement with the CRA.
- Online through your CRA My Account, My Business Account, or Represent a Client
- The automated TeleArrangement service, for personal income tax only
- By phone with a CRA agent
Before you contact them, work out what you can realistically pay each month. The CRA points you to its personal income and expense worksheet for exactly that.
There’s no specific balance that forces a formal financial review, but for longer agreements or those based on financial hardship, expect an agent to request proof of your income, expenses, assets and liabilities before finalizing terms.
Source: Canada Revenue Agency – Payment arrangements
It doesn’t cost anything to set up a CRA payment arrangement. The only cost is the additional interest that accumulates while you make payments.
How much interest does the CRA charge on a payment plan?
Interest accumulates daily on your remaining balance during a payment plan, with the CRA setting the rate quarterly. This means the longer it takes to pay off the debt, the more you’ll owe beyond the original tax. A payment arrangement does not stop interest from accumulating. So if you want to reduce costs, you must pay off the debt faster.
Source: Canada Revenue Agency – Payment arrangements
Through taxpayer relief provisions, the CRA can cancel or waive penalties and interest at its discretion, but never the principal tax. If penalties and interest make up most of the balance, it is worth looking at, and there’s more on it on our CRA debt forgiveness page.
Source: Canada Revenue Agency – Taxpayer relief provisions
What if you can’t afford the CRA’s payment plan?
A payment arrangement only works if you can clear the balance in a realistic timeframe. If the CRA wants more than you can afford, you’ll likely default, which can lead to renewed collection efforts. This may result in wage garnishment or bank account freezes to recover the money.
Source: Canada Revenue Agency – Payment arrangements
At this stage, your options change significantly. While taxpayer relief can help reduce penalties and interest, it will not affect the principal amount owed. To truly reduce your debt, you can consider a consumer proposal or bankruptcy, both of which need to be filed through a Licensed Insolvency Trustee.
A consumer proposal is a legal agreement under the Bankruptcy and Insolvency Act that allows you to repay a portion of your debts, including those owed to the CRA, while having the remaining balance forgiven. Bankruptcy should only be considered when full repayment genuinely isn’t realistic. For a complete overview of alternatives, check our CRA tax debt guide.
Frequently asked questions
How do I set up a payment plan with the CRA?
You can log in to your CRA My Account to arrange it online, use the automated TeleArrangement line for personal income tax, or call a CRA agent directly. Be sure to have a realistic monthly payment figure ready before you start.
Does the CRA charge interest on a payment plan?
Yes, the CRA charges interest on a payment plan, and this interest does not stop accumulating. It compounds daily on the unpaid balance as you make payments, at a rate that the CRA resets each quarter. A payment arrangement allows you to spread the total cost over time, but it does not reduce the overall amount owed.
Will a payment plan stop a wage garnishment?
The CRA can choose to lift a payment requirement once you agree to the terms, but it is not obligated to do so. This decision is up to the collections officer. If your pay is already being garnished, see how to stop a CRA wage garnishment.
What happens if I miss a CRA payment plan payment?
If you miss a CRA payment plan payment, contact the CRA before it’s due. Paying less than agreed without changing the arrangement can lead the CRA to take legal action to collect the balance, including wage garnishment or freezing a bank account.
Can the CRA refuse my payment plan?
If your proposed monthly payment doesn’t clear the balance within a reasonable timeframe for the CRA, an agent may request a higher amount, review your financial information, or deny the arrangement.
Does a CRA payment plan reduce what I owe?
No. It repays the full balance plus interest. Only a consumer proposal or bankruptcy can reduce the principal debt. Taxpayer relief may waive penalties and interest but will not eliminate the tax itself.
How long can a CRA payment arrangement last?
You will repay the balance to the Canada Revenue Agency (CRA) until it’s cleared, with no maximum term. Unlike a consumer proposal capped at five years, the CRA expects you to pay off the debt as quickly as possible. Because interest compounds daily, choosing a shorter repayment period will save you money.
Set up the right plan for your CRA debt
Unsure if a payment arrangement is enough? A Licensed Insolvency Trustee can review your CRA debt and income. The first consultation is free.
Photo of the Connaught Building, CRA headquarters, Ottawa. Photo by Michel Rathwell, licensed under CC BY 2.0.
