How to Pay Your Taxes if you Owe

Tax News, Uncategorized

By Rob Cosman, Partner, Jones & Cosman Chartered Professional Accountants

If you owe taxes, there are several different ways you can pay, depending on the type of tax you owe. Here is a look at the Canada Revenue Agency’s payment options and a brief description of which taxes you may pay with each type of payment.

Online Banking

You may use your bank’s online bill pay service to pay income tax, corporate tax, GST/HST, and payroll source deductions for employees, as well as a range of other taxes. To do so, visit your bank or credit union’s online payment service and add the CRA as a payee. In most cases, your financial institution will have a list of options such as CRA current year-tax return, CRA tax amount owing, or CRA tax instalment payment, and you need to choose the option relevant to your situation. You may do this with your personal or business bank account.

Debit Card

If you have a Visa debit or Interac card, you may use the CRA’s My Payment service to pay any type of tax you owe to the CRA. The service works with Visa debit cards from CIBC, RBC Royal Bank, Scotiabank, and TD Canada Trust, and it works with Interac cards from dozens of financial institutions. The CRA maintains a list of participating institutions on its website.

Credit Cards

You may pay personal and corporate income tax as well as GST/HST, payroll deductions, and excise taxes with a credit card. However, the CRA doesn’t directly accept credit cards. Rather, you must use a third-party service provider such as Plastiq. Service providers may charge a processing fee, and it is important to find out how long the service takes to submit the payment. If processing time makes your payment late, you may be assessed late fees.

Third-Party Service Providers

In addition to processing credit card payments for the CRA, some third-party service providers also accept other forms of payment and remit it to the CRA on your behalf. There are a range of different third-party service providers, and some of them focus on processing different types of taxes. For example, ADP, Blue Canvas, Nethris, and several other service providers only process source deductions for payroll. At the same time, providers such as Telpay and Plastiq process payments for source deductions, corporate and individual income taxes, excise taxes, and GST/HST.

Pre-Authorized Debit

You may authorize the CRA to withdraw funds from your chequing account to pay any type of tax you owe. To set up a pre-authorized debit, visit My Account or My Business Account. Then, select “CRA Register” and follow the prompts to obtain an access code. Once you’re done, the CRA will send you an access code in the mail, and once you receive the code, you can complete the rest of the online registration, which involves adding your bank details to your account.

When you are ready to pay taxes, create a pre-authorized debit to send the CRA the funds you owe. If necessary, you may set up multiple payments with different dates. For example, if you are self-employed and pay income taxes in instalments to the CRA, you may set up quarterly pre-authorized debits to cover your instalments.

It takes five business days to process additions or changes to your pre-authorized debit profile. As a result, if you owe tax immediately but need to make a change to your pre-authorized debit, you may want to select an alternative payment option.

Wire Transfer

Non residents may use wire transfers to pay personal and corporate income tax, GST/HST, and payroll source deductions. You may transfer funds from your bank to the CRA’s bank account at The Bank of Nova Scotia. Make sure to send Canadian funds rather than your local currency.

The Bank of Nova Scotia does not charge a fee to receive the payment, but in most cases, your financial institution will charge a fee for international wire transfers. Transfers may take a few days or even a week or longer to process, and to avoid late fees, you may want to send your payment early. Remember to include the tax year, your Social Insurance Number, full legal name, date of birth, and telephone number with the transfer so the CRA knows how to credit the funds. If you are paying tax on behalf of a business, you should fax a copy of your tax remittance slip or GST/HST return to the CRA when you send your wire.

Canadian Financial Institution

You may pay absolutely any type of taxes at your Canadian financial institution. To do so, bring your personalized remittance voucher to your bank, and give a teller your payment with the voucher. Unfortunately, you cannot use a photocopy of the remittance voucher, and you cannot make a payment without a voucher. If you don’t have a voucher, you may request one online or over the phone.

About Rob Cosman

Rob Cosman, is a Chartered Professional Accountant who runs his own accounting and tax practice with his wife in Toronto, Ontario. Beginning in 2000, Rob’s career spanned over Halifax, Cayman Islands and Toronto. Rob held senior industry positions including CFO roles in public and private industries ranging from telecommunications, retail sales, and consumer packaged goods.

Rob has over 10 years of tax experience and is the author of numerous articles. He has the ability to take complex tax situations, explain them in common sense terms and guide clients to make the best decisions based on their individual situations.