Things are getting expensive these days courtesy of inflation and Government debt / stimulus that flooded the economy over the past few years due to COVID. I talked to one client recently who recognized the stress of the situation but also recognized that this is so much harder for those who are not in the comfortable position he is in. One of these groups of course is those who have cash flow crunches or have fallen behind on their CRA payments.
Tip: If you want to see if CRA will accept your payment arrangements they have a useful tool at the link below, you can use this website to see if what you are going to propose may be accepted.
Payment Arrangement Calculator
Now how about those interest rates being charged by CRA… but before we get there how are they calculated? Well first thing is they come up with the prescribed rate which is set quarterly. (Jan - March, April - June, July - Sep, Oct - Nov). The rate is set for the next quarter based on the simple average of three-month Treasury bills for the first month of the preceding quarter rounded up to the next highest whole percentage point. You can view them here.
https://www.bankofcanada.ca/rates/interest-rates/t-bill-yields/
So if you take October 2022, you will see it is just under 4%, as a result, the rate will be 4% (rounded up) for January - March 2023.
Ok - so now that we know where the prescribed rate comes from here is how it impacts you.
Amounts owing to CRA by taxpayers = Prescribed Rate + 4%; So 8% come January Amounts owing from CRA to taxpayers (individuals and trusts) = Prescribed Rate + 2%, so 6% come January
Amounts owing from CRA to Corporations = Prescribed Rate, so 4%.
If you want to check the current rates use this link
How about Provinces Prescribed Rate? Currently, for income tax, only Alberta and Quebec have their own tax collectors. Their rates are NOT the same than the Federal rate and is in fact higher - so pay them first!