How much interest will the government pay on overpaid taxes?

Jamie Golombek, vice-president of taxation and estate planning at AIM Trimark Investments, has the answer.

Jamie Golombek 29 April, 2004 | 1:00PM
Dear Expert:

I have heard that the rules have changed for when the government pays interest on overpaid income taxes. Can you explain the change and the rules in general? What happens if I end up owing tax when I complete my tax return but can't afford to pay all of it at once?

Expert Answer:

The Canada Revenue Agency (CRA) used to pay interest on overpaid taxes 45 days after the later of the date you filed your return and April 30. The rules were changed last year so that you now get refund interest paid to you on overpaid taxes beginning the later of 30 days after April 30 and the day you filed your tax return. If you owe tax, however, you are charged interest starting on May 1. As long as you file your tax return on time, you will avoid penalties but interest will still accrue from May 1 until the amount owed is paid. Interest accrues at the CRA's prescribed rate, which is currently 7%. Note that on refunds, the current interest rate is only 5%.

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Jamie Golombek

Jamie Golombek