If you`re like many Canadians, you may have heard the term ”pre-authorized debit agreement” and wondered what it means. In short, a pre-authorized debit agreement (PAD) is a payment arrangement where you authorize a business or organization to withdraw money from your bank account on a set schedule.

One organization that uses pre-authorized debit agreements is the Canada Revenue Agency (CRA). If you owe taxes, you may be able to set up a PAD agreement to pay your balance over time. Here`s what you need to know:

How to set up a PAD agreement with CRA

To set up a PAD agreement with CRA, you`ll need to complete and submit Form RC366, the ”Pre-authorized Debit Authorization Form.” You can download the form from CRA`s website or request a copy by calling the CRA`s individual tax enquiries line at 1-800-959-8281.

When you fill out the form, you`ll need to provide your Social Insurance Number (SIN) and your bank account information, as well as details about the payments you want to make. You can choose to make payments weekly, biweekly, monthly, or on a specific date each month.

Once you`ve completed the form, you can mail it to your tax services office or authorized collection agent that is handling your tax account. You can also fax the form to the CRA`s enforcement unit at 1-888-452-8991.

Benefits of a PAD agreement with CRA

One of the primary benefits of setting up a PAD agreement with CRA is that it can help you avoid late payment penalties. If you owe taxes and don`t pay by the deadline, you`ll be charged interest on your balance and may also face penalties. By setting up a PAD agreement, you can ensure that your payments are made on time and avoid these charges.

Another benefit of a PAD agreement is that it can help you budget for your tax payments. If you know that you`ll be making regular payments on a set schedule, you can plan your finances accordingly and avoid any surprises.

Finally, a PAD agreement with CRA can save you time and hassle. Instead of having to remember to make your payments each month, the payments will be automatically withdrawn from your bank account, saving you the trouble of having to remember to do it yourself.

In conclusion, if you owe taxes to the CRA, setting up a pre-authorized debit agreement can be a convenient and beneficial option. By being proactive and setting up a payment plan, you can avoid late payment penalties, budget for your payments, and save yourself time and hassle.