Early in February 2021, the Canada Revenue Agency (CRA) announced that it will provide targeted interest relief to Canadians who received COVID-related income support benefits. Once individuals have filed their 2020 income tax and benefit return, they will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022. This measure provides more time and flexibility to pay your income taxes if you have an amount owing.
To qualify for targeted interest relief, individuals must have had a total taxable income of $75,000 or less in 2020 and have received income support in 2020 through one or more of the government’s COVID-related income support benefits such as the Canada Emergency Response Benefit (CERB), the Canada Emergency Student Benefit (CESB), the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB),the Canada Recovery Sickness Benefit (CRSB), Employment Insurance (EI) and similar provincial emergency benefits.
The CRA will automatically apply the interest relief measure for individuals who meet these criteria.
Additionally, any CRA-administered credits and benefits normally paid monthly or quarterly, such as the Canadian Child Benefit and GST/HST credits, will not be withheld to reduce an individuals’ tax debt owing for the 2020 tax year.
Should I Wait to Pay My 2020 Income Taxes?
Even if you are eligible for the targeted interest relief program, this does not mean that your tax debt is forgiven. You will still need to plan to pay back what is owed.
Many Canadians were aware that they would need to pay income taxes on the CERB benefit and saved throughout the year. If you already have savings to pay your income tax debt, it is best to do so right away. If you could not save ahead of time, the first thing you need to do is find out how much you owe by filing your 2020 income taxes. Once you have that amount, you can develop a budget that includes what you can afford to save towards your income tax debt each month.
If you have more income tax debt than you can handle, or if your finances will not let you make any additional payments on your tax debt, then an extra 12 months might not actually improve your position. If you feel the extra 12 months will not be enough time, then you should begin to consider the other relief options that are available to you.
If you feel that you need help, don’t wait 12 months to run out the clock. Waiting 12 months will not improve your position. Rather, if you start the process now, you may be done a bankruptcy in as little as nine months.