CRA’s Interest Rate on Overdue Taxes Will Rise to 10%
The Canada Revenue Agency (CRA) has revealed that the interest rate on overdue taxes is set to increase to 10%.
The CRA’s decision to raise the interest rate on overdue taxes to 10% underscores the importance of timely tax payments. Taxpayers must be vigilant in meeting their obligations to avoid the compounding financial consequences of the higher interest rate.
Since 2007, the CRA’s interest rates on overdue taxes have been relatively stable, ranging between 5% and 6%. Starting in 2022, the CRA interest rate started to rise sharply and is now 9%.
“In January, the CRA will start collecting 10% interest on current or outstanding overdue taxes, up from 9% in the current quarter”
The Effect of the 10% CRA Rate on Taxpayers
- The rise in interest offers a chance to review financial plans in light of this shift.
- It makes more sense for taxpayers to think about filing their taxes on time because of the 10% CRA rate hike.
- Effective tax planning can reduce the burden. The taxpayers can maintain their financial obligations more manageable by avoiding this additional expense by making their payments on time.
Tax Planning Strategies to avoid higher CRA rates
Timely Filing and Payment
File your taxes on time and pay any outstanding amounts promptly. Late filings and payments can attract penalties and interest, so staying on top of deadlines is crucial.
Explore Tax Credits and Deductions
Understanding the tax incentives provided by the government can help reduce your overall tax liability, leaving you with more resources to meet your financial obligations. Don’t forget to read our article about tax credits & deductions for 2024.
Implement Tax-Efficient Investments
Consider investments that provide tax advantages, such as tax-free savings accounts (TFSA) and registered retirement savings plans (RRSP). These investments can help grow your wealth without incurring additional tax burdens.
Consider Professional Advice
Engaging with tax professionals, such as accountants or tax consultants, can provide personalized insights into your specific situation. They can help you develop a tax strategy tailored to your needs, ensuring compliance with regulations and optimizing your overall financial position.