CRA going to 10% interest on overdue taxes

Figuring out tax instalments and paying tax bills on time is confusing for many taxpayers. Getting it wrong is getting a lot more expensive as the interest on overdue taxes is going from its current 9% to 10% in the new year, up from 5%, or double what it was just 14 months ago.

Remember that this interest is compounded daily, it can add up in a hurry.

The increased interest rate impacts not only overdue taxes and instalment payments but can lead to instalment penalties being applied a lot sooner, as instalment penalties are typically levied based on the amount of instalment interest charged, which, again, has increase by 100% in the last 14 months.

Clayton featured in Investment Executive magazine

Clayton Achen recently had a discussion with Rudy Mazetta, senior reporter with InvestmentExecutive.com about the issue. Rudy asked Clayton why the CRA seems to be more aggressive with taxpayers lately. Clayton pointed to all the new rules that have recently taken effect that are set to provide the CRA with un-precedented new information and power, including:

  1. New Trust Reporting Rules for 2023 T3 Returns – Achen Henderson
  2. Everything you need to know about Underused Housing Tax – (achenhenderson.ca)
  3. The new mandatory disclosure rules
  4. The new General Anti Avoidance Rules (GAAR) and more.

“There’s a huge data-gathering exercise going on right now, and I think, in a sense, it’s emboldening the CRA,” said Clayton Achen, a partner with Achen Henderson Chartered Professional Accountants in Calgary.”

CRA’s 10% interest rate on overdue tax raises risks | Investment Executive

Tips for avoiding interest and penalties on overdue taxes and instalments

  1. Talk to your accountant, and understand your deadlines. Mark them in your calendar.
  2. Understand the status of your tax accounts. Not sure how? Sign up for CRA’s My Account (personal) and My Business Account (business), all your tax balances are listed there. Still confused on how to register? Here’s the CRA’s video showing you how My Business Account – How to Register for My Business Account – YouTube
  3. Understand how instalments work, and how much you need to instal. Podcast: How do tax instalments, interest, and penalties work?
  4. At the beginning of the year, as soon as you learn your instalment balances from your accountant, setup scheduled payments with your bank. Set it and forget it.
  5. Ensure that your books are always up to date, review them monthly with your bookkeeper to ensure they are accurate. Faster financial results leads to faster tax planning.
  6. If #5 seems daunting, as it does for most business owners, get help from a great accounting firm, like Achen Henderson CPAs.
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