Many Canadians look forward to tax season, often hoping for a refund that can ease financial pressure. However, a significant number of taxpayers end up owing money instead. For households already carrying high levels of debt, an unexpected tax bill can quickly create added stress and financial strain.
At SolveYourDebts.com, this is one of the busiest times of year. Many people are still managing the impact of recent expenses and are counting on a tax refund to help pay down debt. Unfortunately, that expectation doesn’t always match reality. When a balance is owed instead of refunded, it can disrupt even the most well-intentioned financial plans. Relying on a refund to solve debt challenges is risky and can leave you unprepared.
It’s important not to delay taking action. The CRA has strong legal powers to collect unpaid taxes, including freezing bank accounts, garnishing wages, and placing liens on property. Taking steps early to understand your options and create a plan to address what you owe can help prevent the situation from escalating. Ignoring it will only make things more difficult to manage over time.
- File on time: If you fear that you may have to pay money to the CRA, do not postpone filing your taxes to avoid seeing how much you owe. Whether you have the money or not, file your tax returns by the deadline of April 30, 2026. The late-filing penalty is 5% of your 2025 balance owing, plus an additional 1% for each full month you file after the due date, to a maximum of 12 months.
- Find the money: If you don’t have the money to pay right away, do everything in your power to come up with it. Ask your family and friends, get a loan from a bank or other lenders, use your home equity, sell your junk at a garage sale, or find a part-time job or side hustle. The sooner you can find the money, the lower the penalty will be. The CRA does not allow a large grace period once you find out you owe. If you have a balance owing for the 2024 tax year and are unable to pay it by the April 30 payment due date, the CRA will start charging you compound daily interest as of May 1, 2026. If you regularly owe money for taxes every year, you should aim to start saving money for your tax bill over the next year if possible. Check out some of our tips on how to save if you don’t have any money.
- Pay in instalments: If you simply cannot afford to pay your income tax in full, consider paying it in several instalments spread over some months. The government would rather get their money in instalments than not at all. The CRA offers payment arrangements if you have reasonably tried to get the necessary funds by borrowing or rearranging your financial affairs. Visit the CRA website and contact them to find out how.
- Pay the tax with a fine: If you are unable to find the money within the deadline, then wait until payday or until you can get some money and then make the payment as soon as the money arrives. You will be charged interest on the amount you owe the government and possibly a penalty. Keep in mind that the interest accumulates every month that you don’t pay, so try to pay it off as soon as you can.
If you’re struggling to make ends meet, contact us today for a free budgeting session. We can help you create a manageable budget and provide you with the education needed to stay out of debt.
