Many Canadians depend on their tax refunds to repay debts or catch up financially, but when those refunds develop into lower than expected (or worse, turn right into a bill), it could possibly push already overburdened households further into debt, making a vicious cycle that’s difficult to interrupt.
We spoke with Stacy Yanchuk Oleksy, CEO of Money Mentors, in regards to the challenges Canadians face, tips on how to avoid a surprise bill at tax time and what to do should you still owe money after filing your tax return.
Why so many Canadians are vulnerable when filing taxes
The Vividata study surveyed 75,000 people across the country to get an idea of Canadians’ personal financial situation. The answers resulted in the next:
- 36% of cardholders have a bank card balance
- 58% have less disposable income than before
- 51% must keep on with a strict budget to make ends meet
- 37% feel overwhelmed by financial burdens
- 71% say the rising cost of living has reduced their ability to save lots of
These answers and the indisputable fact that almost half (49%) of indebted Canadians living paycheck to paycheck suggests that Canadians are struggling to make ends meet. And increasingly more individuals are counting on tax refunds to remain afloat, which generally is a problem in the event that they find yourself paying debts as a substitute of getting a refund.
“Financial stress is a function over time,” Yanchuk Oleksy said. And the Canadians have had a tricky few years. Post-COVID prices are still high, although inflation has cooled to pre-pandemic levels. Unfortunately, wages haven’t kept pace with inflation and lots of people have needed to resort to savings or loans to make ends meet.
The study also showed that younger generations (between the ages of 25 and 34) are more than likely to have consumer debt. According to Yanchuk Oleksy, it’s because younger generations had greater access to bank cards, widespread opportunities to make use of buy now, pay later plans, and were under pressure to maintain up with their peers’ purchasing habits in comparison with older generations.
Related reading: As Canadians grapple with rising costs, calls for credit counseling are increasing
This will make it easier to avoid falling into the tax debt trap
We mentioned that more Canadians are planning to make use of their tax refunds to repay bank card debt, but taxpayers should not guaranteed a refund. In fact, you might find yourself owing debt when you file. Since Yanchuk Oleksy is a debt expert, we asked her how Canadians can best avoid a surprise bill from the Canada Revenue Agency (CRA). Here are the strategies she recommends:
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- Check your payroll deductions. You may not receive enough taxes out of your regular paychecks. Adjusting this will make it easier to avoid a bill next 12 months. It’s also a great idea to ascertain for payroll errors whilst you’re at it.
- Consider your income from side hustles or gigs. Even should you don’t make much income from these side hustles alone, the more money you make can catapult you into the next tax bracket, meaning you could actually owe more at tax time.
- Increase tax deductions out of your paychecks. If you owed debt this 12 months and every little thing was so as in your pay stubs, you may deduct additional taxes from each paycheck. All it’s worthwhile to do is fill out a brand new TD1 form and submit it to your employer.
- Learn more about tax credits. You can have to pay taxes this 12 months since you are not any longer eligible for a tax credit you received up to now. Eligibility for credits and advantages is always changing. Therefore, stay awake up to now on changes to provincial and federal programs to avoid surprises when applying.
Check your credit rating
Prosper Canada offers an incredibly useful financial tool on their website. Enter your demographic information Advantages of the Wayfinder tool to view a listing of provincial and federal loans or programs for which you might be prone to be eligible. The tool even tells you if separate filings are required or should you just have to file your personal taxes.
How to cope with tax debts
For Canadians who have already got balances, adding tax liabilities can quickly snowball – especially in the event that they use high-interest loans to repay their debts.
There are few things worse than going through the means of filing taxes after which checking out that you just owe money, especially should you have already got bank card debt which you can’t repay. Before you panic, take a breath and consider what your options are.
Income Tax Guide for Canadians
Deadlines, tax suggestions and more
Yanchuk Oleksy says you must pay the tax debt should you can afford it. If not, contact the CRA and explain that you just are having trouble making payments. She notes that the CRA is at all times open to working with taxpayers to search out a payment plan that works for everybody. “They’re there to help and make it work.”
On the opposite hand, should you ignore the bill or miss payments and don’t reply to the CRA’s attempts to contact you, you’ll only make the situation tougher. Maybe you have already reached this point and do not know where to show. Don’t hesitate to contact a nonprofit credit counseling agency for assistance. They can make it easier to create a manageable budget that features tax debt and point you toward invaluable community resources.
Government support updates for 2026
Affordability has definitely been a spotlight for the federal government. In response to higher prices and economic uncertainty, Parliament introduced the Canada Groceries and Essentials Benefit Act, replacing the GST/HST credit. With this recent laws, eligible Canadians will receive:
- A one-time bonus payment In spring 2026, this represents a 50% increase within the annual value of the GST/HST credit during 2025-2026
- A 25 per cent increase within the Canada Groceries and Essentials Benefit for five years, starting in July 2026
The final result
Times are tight for a lot of Canadians and carrying a bank card balance has develop into a reality for a lot of households. But counting on tax refunds to remain ahead will be dangerous when a balance turns right into a bill. Planning ahead by adjusting tax withholdings, keeping track of your income, and knowing the credits available can reduce your possibilities of being caught off guard if you file. If you might be already facing tax debt, acting early and in search of assistance may help make it more manageable.
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