CRA Installment Payment Arrangements: How to Negotiate and What Happens If You Miss One

The CRA does not offer the formal tiered installment agreement structure the IRS uses. There is no Canadian equivalent of the IRS’s streamlined, guaranteed, or partial-pay installment agreements. Instead, the CRA negotiates payment arrangements case by case, and the terms depend on what the CRA collections officer decides you can afford. The CRA has broad discretion, and the process is less transparent than the IRS’s formula-driven approach. That discretion cuts both ways: the CRA can be more flexible than the IRS, but it can also be less predictable.

How do I set up a payment arrangement with the CRA?

There are three ways:

My Account online. If your balance is under $25,000 (individual) and you can pay within 12 months, you can set up a payment arrangement through CRA My Account under “Arrange to pay.” This self-serve option does not require speaking with a collections officer and is the fastest path for straightforward cases.

Call CRA Collections. The general collections line is 1-888-863-8662 (for individuals) or 1-800-675-6184 (for businesses). You will speak with a collections officer who has the authority to approve an arrangement. Be prepared to discuss your income, expenses, assets, and debts. The officer will determine what you can reasonably pay each month.

Through your representative. If you have an authorized representative (CPA, tax lawyer) with Represent a Client access, they can negotiate the arrangement on your behalf. This is often more effective because the representative can present a structured financial disclosure and propose terms proactively rather than reacting to the officer’s questions.

Unlike the IRS (where certain installment agreements are approved automatically based on formulas), the CRA officer has discretion over whether to accept the arrangement and what terms to set. There is no statutory right to an installment agreement in Canada.

What will the CRA accept?

The CRA’s goal is to collect the full balance as quickly as possible. The officer evaluates your ability to pay based on your income and essential living expenses. The CRA does not publish living expense standards the way the IRS does (the IRS uses Collection Financial Standards for food, housing, transportation, and health care). Instead, the CRA officer exercises judgment about what constitutes a reasonable expense.

In practice:

Under $25,000, under 12 months. The CRA generally approves these without extensive financial review. The monthly payment is the balance divided by the number of months, plus interest.

Larger balances or longer terms. The CRA will request a financial disclosure: income from all sources, monthly expenses (mortgage/rent, utilities, food, transportation, childcare, medical), assets (savings, investments, property), and other debts. The officer calculates your disposable income and expects you to commit most of it to the payment arrangement.

The CRA will not accept “I can only pay $100/month on a $60,000 debt.” If the CRA determines that you can afford more, it will propose a higher payment. If you genuinely cannot afford what the CRA proposes, you can escalate to a team lead or file a service complaint through the Taxpayers’ Ombudsperson. But there is no independent appeals process for payment arrangement terms (unlike the IRS’s CDP hearing).

Lump-sum followed by installments. If you have savings, the CRA may require an immediate lump-sum payment (liquidating non-essential assets) followed by monthly installments on the remainder.

What interest accrues during the arrangement?

Interest accrues on the outstanding balance at the CRA’s prescribed rate, compounded daily, for the entire duration of the arrangement. The prescribed rate for tax debts is set quarterly and has been between 8% and 10% in recent quarters (it is tied to the Bank of Canada rate plus a margin). This is not a reduced rate. There is no interest reduction for entering into a payment arrangement.

For a $32,000 balance at 9% compounded daily, the interest adds approximately $2,880 in the first year alone. Over a 24-month arrangement, total interest could exceed $4,500. Every dollar of interest that accrues during the arrangement increases the total you pay. Shorter arrangements cost less in total interest.

If you believe the interest itself is causing financial hardship, you can apply for interest relief through a taxpayer relief request (Form RC4288). This is a separate process from the payment arrangement. The CRA can cancel or waive interest for periods attributable to CRA processing delays, extraordinary circumstances (natural disasters, serious illness), or financial hardship. But interest accrued during a voluntary payment arrangement is generally not eligible for relief unless the underlying debt resulted from CRA error.

What happens if I miss a payment?

Missing a payment on a CRA payment arrangement has immediate consequences:

The arrangement may be cancelled. The CRA can treat a missed payment as a default and cancel the arrangement, making the full remaining balance due immediately. Some officers give a grace period or allow a catch-up, but there is no statutory requirement to do so.

The CRA can proceed to collection action. Once the arrangement is cancelled, the CRA can issue a Requirement to Pay (garnishment) to your employer or bank without further notice. The CRA does not need court approval to garnish. There is no 30-day notice period equivalent to the IRS’s Final Notice of Intent to Levy.

Your history affects future negotiations. If you default on one arrangement and try to negotiate another, the CRA will view you as a higher risk and may require stricter terms (larger lump sum, shorter repayment period, pre-authorized debit).

If you cannot make a payment, call before the due date. The CRA is more likely to accommodate a temporary shortfall if you contact them proactively. If you simply stop paying without communication, the CRA will move to enforcement.

How is this different from an IRS installment agreement?

	CRA Payment Arrangement	IRS Installment Agreement
Statutory right	No	Yes (IRC 6159)
Automatic approval	Under $25K, under 12 months (informal)	Under $10K guaranteed, under $50K streamlined
Application form	None (phone or My Account)	Form 9465 or online
Expense standards	Officer discretion	Published Collection Financial Standards
Interest rate	Prescribed rate (~8-10%)	Federal short-term rate + 3% (~8-10%)
Appeal if denied	Taxpayers’ Ombudsperson (limited)	CDP hearing (independent Appeals officer)
Collection during dispute	CRA can collect immediately	IRS must stop during CDP hearing
Tolling of statute	No collection statute in Canada	Tolls the 10-year CSED

The most significant difference: Canada has no collection statute of limitations. The CRA can collect a tax debt indefinitely. There is no Canadian equivalent of the IRS’s 10-year CSED. This means a CRA payment arrangement cannot be used as a “wait it out” strategy the way an IRS partial-pay installment agreement can.

How does owing both CRA and IRS affect the arrangement?

For cross-border filers who owe both agencies, the payment arrangement with each is independent. The CRA does not coordinate with the IRS, and neither agency considers the other’s debt when evaluating your ability to pay. This creates a squeeze: if you owe $30,000 to the CRA and $20,000 to the IRS, each agency evaluates your disposable income as if the other debt does not exist.

The practical approach:

Negotiate with both agencies separately. Set up the CRA arrangement first (the CRA can garnish Canadian income directly, with no court process), then negotiate with the IRS. Present the CRA payment to the IRS as a mandatory expense, which may reduce the IRS’s calculated disposable income and lower the required IRS monthly payment.

If you live in Canada and the IRS debt is the larger concern, the IRS’s ability to collect from Canadian assets is limited to treaty collection assistance under Article XXVIA, which applies only to debts that have been “finally determined.” The CRA has immediate domestic collection authority. Prioritize the CRA arrangement if the CRA is actively pursuing collection.

Interest compounds on both debts simultaneously. If you are paying $800/month to the CRA and $400/month to the IRS, and both debts are accruing interest at approximately 9%, the total interest cost across both agencies can exceed the principal payments. Accelerating one debt to zero before the other can reduce total interest, but the choice of which to pay first depends on enforcement risk, not just interest math.

What should I do next?

If you owe the CRA and cannot pay in full: call CRA Collections or set up through My Account if eligible. Have your financial information ready before calling (income, expenses, assets, debts). Propose a payment amount and term that you can realistically meet, because missing a payment can trigger immediate garnishment. If you also owe the IRS, negotiate with the CRA first (immediate enforcement risk), then negotiate with the IRS separately. If penalties and interest are a significant portion of the balance, consider a taxpayer relief request in parallel with the payment arrangement, and review whether the late-filing penalties can be reduced.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.