Tuesday, 29 April 2008

Online Payment of Income Taxes to the Canada Revenue Agency

Should you find yourself in the unfortunate position (or fortunate, if you look at it as the fact that you have had a loan from the government during the past year) of owing money to the Canadian government once you have calculated your taxes for this year here's a tip for how to do it easily online.

It's important to get your tax money in on time to avoid late payment penalties, in fact more important than sending in the return itself. I doubt whether CRA would penalize you for sending in the money on time but not the return (they certainly don't penalize you when you don't owe anything and file a return only a year or more later). One of the pieces of advice I have read in the past is that if you do not know and for some reason cannot figure out how much you owe by the deadline, take a guess and send that in right away. If it manages to cover the amount owing as figured out later, then you avoid paying onerous interest as CRA's rates on arrears are much higher than you could earn on the money in a bank account.

Here's how to do it. The Canada Revenue Agency has set itself up to receive payment online through the electronic biller facility offered by every financial institution of note in Canada. The list of institutions and instructions are at this CRA page.

When combined with electronic filing of the tax return through NetFile, you can indulge procrastination tendencies and do things at the last minute!

Though I wouldn't push the bill-payer payment capability too far since there is a caveat that the payment is not guaranteed to be instantaneous. BMO's disclaimer says, "It may take up to 5 business days for your payment to be reflected on your biller's account." My experience is that 99% of payments go through within one day. Based on past discussions with the bank on this subject it seems that the speed depends partly on the payment receiver and its accounting systems. It would be interesting to know if the CRA applies the same rule for these electronic payments as it does for paper where the postmark is the key to proving the payment was made in time. Just in case, it's good to write down the reference number for the online payment, which is time and date stamped.

The online capabilities are a boon to anyone immobile, remote or out of the country who may have to pay taxes from afar, like me (though I only owe the CRA $0.66 ;-).

2 comments:

VasileB said...

Hi!

Not sure exactly how this works, but on page4 of T1 (cell 484/485) it's written that that you don't have to pay (or expect to receive a cheque) if the amount is less than $2.

CanadianInvestor said...

I know, just wanted to test it out. ;-)

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