CRA payment arrangement: pay over time, but 7% interest keeps running

Which debts can you schedule online, and which need a call?

Your client can arrange to pay over time in two ways: schedule a series of preauthorized debit (PAD) payments in a CRA online account, or call the CRA and set the arrangement up with an agent canada.ca. Which online account handles it depends on the debt.

The debt list comes from the CRA's arrangements page, updated September 18, 2026 canada.ca. The phone numbers come from the CRA's collections contact page, and every line is open 8 a.m. to 8 p.m. Eastern, Monday to Friday canada.ca. If a collections officer has already written to your client, call the officer at the number in that letter instead canada.ca.

How do you set one up for a client?

For an individual with a personal income tax or COVID benefit debt of $1,000 or more, the fastest route is the Manage balance service in My Account. It launched October 22, 2025, and lets your client pay in full or in part, schedule a series of payments, or contact a collections officer without calling. Balances that already have an arrangement no longer show in it canada.ca.

Otherwise, your client signs in, selects "Proceed to pay," then "Schedule a series of payments," and confirms the PAD agreement. The agreement starts when the first scheduled payment comes out of the bank account canada.ca. The PAD rules accountants trip on canada.ca:

If you hold legal representative authorization for an individual, you can schedule the PADs yourself in Represent a Client. A business representative can't schedule PADs for a business, so the business sets them up itself in My Business Account canada.ca. Authorization levels are covered on the Represent a Client page.

By phone, have the SIN or business number, the full name and date of birth or business name, the address, and the notice of assessment or reassessment ready. The automated TeleArrangement line (1-866-256-1147) handles personal income tax debt only, Monday to Friday from 7 a.m. to 10 p.m. Eastern canada.ca. When an officer negotiates the plan, the CRA can ask for supporting documents proving income, expenses, assets and liabilities, and may verify them before accepting. Its policy is to consider an arrangement once your client has tried all reasonable ways of raising the money canada.ca.

Interest keeps running: a worked example at 7%

An arrangement doesn't freeze interest. The CRA's collections policy says it keeps charging interest until the amount is paid in full, and that interest compounds daily on both tax and penalties canada.ca. The statutory basis for individuals is ITA s.161(1), which charges the prescribed rate on unpaid tax after the balance due day for as long as it stays unpaid laws-lois.justice.gc.ca. For October 1 to December 31, 2026, that rate is 7% canada.ca.

Say your client owes $12,000 on October 1, 2026 and pays $4,000 on the last day of October, November and December. Each month, the balance grows by (1 + 0.07 / 365) raised to the number of days, then the payment comes off.

Three payments that add up to the original $12,000 still leave $142.67 of interest owing on December 31. With no payments at all, the same $12,000 would have grown by $213.58 over those 92 days. Treat these figures as estimates, since the CRA statement is what your client actually owes. Quarterly rate changes and the compounding mechanics are on the overdue interest page.

What can collections still do while your client pays?

Federal benefit and credit payments can still be applied to the debt even with an arrangement in place canada.ca. ITA s.164(2) lets the Minister apply a refund to any amount the taxpayer owes, or is about to owe, to the federal or a provincial Crown, and then notify the taxpayer laws-lois.justice.gc.ca. For an individual tax debt, the CRA applies these automatically, with two exceptions canada.ca:

Legal action is the other risk. If your client pays less than agreed without changing the arrangement first, the CRA may take legal action to collect canada.ca. Before that, it generally makes one verbal warning attempt and sends one written warning, and a legal warning stays valid for 180 days. For payroll and GST/HST debts, the notice of assessment counts as the written warning, so action can start right after the notice. The listed actions are garnishing income and accounts, making another person liable for the debt, and placing a lien on or seizing assets canada.ca.

For income tax, most of those steps are barred until 90 days after the notice of assessment is sent, and during an objection or Tax Court appeal on the disputed amount, under ITA s.225.1. Those restrictions don't cover source deductions, s.116 amounts or Part VIII tax, and a large corporation (taxable capital over $10 million) can be made to pay half the assessed amount during an objection laws-lois.justice.gc.ca. Unremitted source deductions can also reach directors personally, as the director liability page explains.

The gotchas that trip accountants

Proposing an arrangement restarts the limitation period. The CRA lists writing to propose a payment arrangement, asking about PAD payments and making a voluntary payment as acts that restart the 10 year income tax collection period canada.ca. If an old debt is close to expiring, read the collection limitation period page before your client writes or pays anything.

Future compliance is part of the deal. Your client must pay on the agreed dates, file every future return on time and stay current with obligations, and the CRA may review the arrangement periodically. If a payment can't be made, call before the date to change the plan canada.ca. The policy also asks your client to call if their financial situation changes while the arrangement runs canada.ca.

An arrangement doesn't reduce what's owed. The CRA can grant relief of penalties and interest in certain situations canada.ca, which is a separate request covered on the taxpayer relief page. If your client truly can't pay for reasons beyond their control, the CRA may also allow payment to be postponed or accept security instead of payment, but interest and penalties keep being added canada.ca.