You owe the CRA and can't pay: what to do, in order

Summary

If your corporation owes the Canada Revenue Agency (the CRA) money it doesn’t have, stop treating what you owe as a single debt. You probably owe in four separate places, and they fall into two groups that the CRA collects very differently.

1. File every outstanding return this week, even with no money attached to pay it. Filing late can add a penalty on top of the interest already running, so an unpaid return still needs filing on time.
2. Split the balance into trust money and your own money. Trust money is the payroll deductions you held back from wages (income tax, Canada Pension Plan contributions and Employment Insurance premiums), including the deductions from your own paycheque if you pay yourself a salary, plus the GST/HST you collected less the input tax credits you can claim. Your own money is your corporation’s income tax and your personal tax.
3. Pay in that order: payroll deductions first, then GST/HST, then your corporation’s income tax, then your personal tax. The CRA can send you personally a bill for trust money the company failed to hand over, and it starts collecting on trust money much sooner.
4. Work out what the business can genuinely pay each month, then call the collections line for each account you owe on. There’s a separate number for payroll, for GST/HST and for corporate income tax, and each handles only its own balance.

That order is our view of the sensible default for an owner-managed corporation, so long as the balance is one the business can eventually clear. Where it isn’t, the real question is whether the company survives. Add up what the business has left over in a normal year after every bill including your own pay, and if the CRA balance is more than about two years of that, get a licensed insolvency trustee (a federally licensed professional who can price a restructuring or a wind-up) to look first.

The two groups, and the order to pay them in

Your corporation doesn’t hold one account with the CRA. Separate program accounts for corporate income tax, payroll and GST/HST hang off its nine-digit business number, each with its own balance, its own due dates and its own account number ending (RC, RP and RT). Your bank’s list of CRA payees holds a separate entry for each, so when you pay you’re choosing which balance the money clears. A payment sent to the wrong account doesn’t move itself, and the balance you meant to clear keeps running up interest as though you’d paid nothing.

Two of the four balances are money that was never the corporation’s to spend. Payroll deductions and net GST/HST are held in trust for the government from the moment you withhold or collect them, even though they sit in your ordinary bank account with everything else.¹ The CRA can bill you personally for trust money, and it can start collecting on it sooner. On income tax, your corporation’s or your own, it normally waits 90 days after issuing a notice of assessment (the letter setting out what it says you owe) before it can order your bank to hand over what’s in the account, or tell your customers to pay it rather than you. No such wait protects payroll, and the CRA states that no equivalent restriction applies to GST/HST either.¹

Payroll deductions come first, because paying them late is the one case that carries a penalty as well as interest, and that penalty runs on a scale of days rather than as a rate per year. Remitting means sending the money you withheld to the CRA, and the deadline depends on the remitter type the CRA assigns your payroll account. For most small employers it falls in the month after you ran the payroll, and your own date is on your remitter notice. One to three days late costs 3% of the amount you failed to remit, and more than seven days late, or nothing sent at all, costs 10%.² The ordinary penalty applies only to the amount above $500, unless the failure was knowing or grossly negligent. Set that 10% against the annual rate of interest the CRA charges, which is on our CRA interest rates page and sits below 10% in every 2026 quarter the CRA has published: a large late payroll remittance can therefore cost more in eight days than a full year of interest.³

GST/HST comes second because it’s still trust money with no waiting period in front of it, though its penalty doesn’t spike the way the payroll one does. Your corporation’s income tax comes third, since it’s an ordinary debt with the usual 90-day pause and no automatic director liability for that tax, and your personal tax comes last, since it’s the only balance where nothing but your own finances is at stake.

Filing when you have nothing to send

Owners who can’t pay very often stop filing, and that’s the expensive mistake. A corporation’s income tax return is due six months after its year end, so June 30 for a December 31 year end, and the tax itself was due earlier: three months after year end for most owner-managed Canadian corporations claiming the small business deduction (March 31 on that same year end), and two months for corporations that don’t qualify (February 28). If you don’t know which you are, assume two months and check.⁴

File the return late and the penalty is 5% of the tax still unpaid on the filing due date, plus 1% of that same amount for every complete month the return is late, up to twelve months.⁵ On $50,000 of unpaid corporate tax, six months late, that’s $5,500 on top of the tax and the interest. Filing on time with nothing attached would have made it zero. A late GST/HST return carries its own late-filing penalty, far smaller and also capped at twelve months: on $10,000 of net tax six months late, the formula produces $250.⁶ Filing does carry one cost worth naming, because a payroll or GST/HST return turns an unknown into an assessed balance the CRA can act on straight away. File anyway, because the late-filing penalty runs whether or not the CRA yet knows what you owe.

Payment arrangements

A payment arrangement is an agreement with the CRA to clear a balance in scheduled amounts instead of all at once. A business can use pre-authorized debits (i.e. the CRA pulling an agreed amount out of your business bank account on set dates) scheduled inside My Business Account, the CRA’s online portal for your corporation. An accountant or bookkeeper you’ve authorised can phone collections and negotiate the arrangement for you. Only someone signed in as the business can schedule the debits themselves, so that last step is yours.⁷ The collections lines are split by debt type: 1-866-291-6346 for corporate income tax, 1-877-477-5068 for GST/HST and 1-877-548-6016 for payroll.⁸

What an arrangement buys is a stop on the CRA starting new legal action, for as long as you keep to it. What it doesn’t buy is a clean slate. Refunds and credits still get applied against the balance while you’re paying, and an order already served on your bank or your customers usually isn’t withdrawn until the account is paid in full.⁷ The CRA asks for documentation of your income, expenses, assets and liabilities, expects you to have tried every reasonable way of raising the money first, including borrowing, and expects you to keep filing on time.

Interest keeps running at the prescribed rate for the whole life of the arrangement, because agreeing to a plan doesn’t slow it down. It compounds daily, it’s charged on unpaid penalties as well as on unpaid tax, and none of it is deductible against your corporation’s income (i.e. it doesn’t reduce your corporate tax bill the way a business expense does).⁹ Work out week by week, for the next three months, what’s actually coming in and what has to go out. Size the payment off the worst of those weeks rather than off the balance split into twelve equal instalments, and if a payment is going to fail, call before the withdrawal date.

Personal liability for trust money

If your name went on the company’s filings as a director (i.e. it appears on the incorporation documents or the annual return), you’re a director, and in most owner-managed corporations the owner is the only one. Where a corporation fails to remit payroll deductions or GST/HST, the CRA can assess its directors personally, meaning it sends you your own bill for the company’s unpaid amount plus the interest and penalties on it.¹⁰ On the payroll side that reaches the employer’s share of CPP and EI too, not only what you held back from wages. Any one director can be billed for the whole balance, and nothing equivalent applies to the corporation’s own income tax. Liability isn’t automatic, because the CRA has to establish first that it can’t collect from the corporation, and the main conduct-based defence is due diligence: the steps a reasonably prudent person would have taken to prevent the failure, taken before it happened.¹⁰

How often this changes

The interest rate resets every calendar quarter, which is why this page states no figure and links the page that carries the current one. Penalty structures and the director liability rules change rarely, and the split between trust money and your own money doesn’t change at all. Re-run that split whenever a notice of assessment arrives, and revisit an arrangement whenever revenue moves materially. Quebec and Alberta collect their own corporate income tax rather than leaving it to the CRA, so in either province you’ll need a second, separate arrangement with the provincial agency.

Closing thoughts

Most CRA balances on owner-managed corporations start as a cash-flow decision rather than a tax decision, in a slow quarter where withheld payroll money covers the rent instead. Owners who get out of it fastest are the ones who stop that leak first, with a standing transfer that moves the withheld and collected money into a second bank account on the day it arises. Working through the balance already owing comes second, and it takes longer.

How we handle it

We pull the statements of account for each of your corporation’s CRA program accounts, split the balance into payroll, GST/HST and corporate income tax, and file whatever is outstanding. Then we build the cash forecast a collections conversation needs and make the call with you or for you. Scheduling the debits has to happen from your own sign-in, and we stay on the line while you do it.