Why Do I Owe Taxes This Year?
The usual reasons Canadians owe tax in April, and how to stop it happening next year.
The short version
- You owe when the tax taken off during the year was less than the tax on your total income. It's almost never a penalty; it's a shortfall.
- The usual causes: two jobs, a pension plus CPP and OAS, self-employment or side income, investment income, an RRSP or RRIF withdrawal, or the OAS clawback.
- The balance for 2026 is due April 30, 2027, even if you file by June 15 because you're self-employed.
- Owe more than $3,000 this year and in either of the two years before? CRA will ask for quarterly instalments.
- Can't pay it all? File on time anyway, and ask CRA for a payment arrangement.
Why Do I Owe Taxes This Year?
Last year you got $800 back. This year, same job, you owe $1,900. Nobody changed the tax rates on you. Something about your income changed, and the tax coming off your pay didn't keep up. Here's the list, roughly in order of how often it's the answer.
The Seven Usual Reasons
1. Two Jobs, or a Job That Changed Mid-Year
Each employer deducts tax as if it were your only job, and each gives you the full basic personal amount. Add the two together and you're in a higher bracket than either payroll department knew. The marginal tax rate page explains why the extra dollars cost more.
2. Pension, CPP and OAS
Retirement income comes from several payers, and CPP and Old Age Security take no tax off unless you ask. The employer pension withholds on its own amount only. Together, the total lands in a higher bracket than any one payer assumed.
3. Self-Employment or Side Income
Nobody withholds anything, and you also owe both halves of CPP on net earnings over $3,500. Even a modest side business can turn a refund into a bill. The self-employed tax calculator shows what to set aside, and self-employed taxes in Canada covers the rest.
4. Investment Income and Capital Gains
Interest, dividends, fund distributions and capital gains have no tax taken off at source. A big sale in a non-registered account can mean a big April. See capital gains tax.
5. An RRSP or RRIF Withdrawal
The bank withholds 10% on RRSP withdrawals up to $5,000, 20% from $5,000 to $15,000, and 30% above that (outside Quebec). If your real marginal rate is higher, as it often is, you owe the difference. RRIF minimum withdrawals usually have nothing withheld at all.
6. The OAS Clawback
If your net income is over $95,323 for 2026, Old Age Security is reduced by 15% of the excess, and the repayment is calculated on your return. It feels like extra tax, because it is.
7. Fewer Deductions or Credits Than Last Year
A child turned 17, an RRSP contribution you didn't make this year, tuition used up, a spouse who started working: each can shrink a refund into a balance without any change in pay. A form TD1 that claims credits you don't have does the same thing every pay period.
Want to know exactly why you owe?
Give the assistant your slips and your province. It runs the calculator, compares the tax with what was withheld, and tells you which of these reasons applies.
Check the Return Before You Pay
Sometimes the answer is a mistake: a slip entered twice, a deduction missed, the wrong province. Run your numbers through the income tax calculator and compare. Before filing, Return Check looks for missed deductions and credits and slips that don't match. Our tax deductions and tax credits guides list what's claimable.
Paying It
- Due date: April 30, 2027 for 2026, for everyone. Self-employed people file by June 15, but interest on any balance starts May 1.
- Interest: compound daily on the unpaid balance from May 1.
- Can't pay in full? File on time anyway. The late-filing penalty is 5% plus 1% a month, on top of interest; see filing taxes late. Then pay what you can and ask CRA for a payment arrangement. See paying CRA late.
Instalments: When CRA Wants It Quarterly
If your net tax owing was more than $3,000 in the current year and in either of the two previous years, CRA expects quarterly instalments: March 15, June 15, September 15 and December 15. CRA sends reminders with suggested amounts. Ignore them and you may pay instalment interest, and a penalty in larger cases. All the dates are on Canadian tax deadlines.
Stop It Happening Next Year
- Two jobs or pensions: ask one payer to take off extra tax (form TD1, or a request to your pension plan, CPP or OAS).
- Self-employed: move 25% to 35% of every payment into a separate account the day it arrives.
- RRSP withdrawals: ask the bank to withhold more than the minimum.
- Investments: hold interest-paying investments in a TFSA or RRSP.
Check before you file with the tax refund estimator, or see your take-home pay per paycheque with the salary tax calculator.
Owing Tax Questions
Why do I owe taxes this year when I got a refund last year?
Usually because your income changed and the tax withheld did not keep up: a second job, a pension starting, side income, investment income, an RRSP withdrawal, or losing a deduction or credit you had last year.
Why do I owe taxes with two jobs?
Each employer withholds tax as if its job were your only income and applies the basic personal amount. Combined, your income is taxed at a higher rate than either employer withheld for.
When do I have to pay taxes owing in Canada?
The balance for 2026 is due April 30, 2027, including for self-employed people who have until June 15 to file. Interest starts on May 1.
What if I can't pay what I owe?
File on time to avoid the late-filing penalty, pay what you can, and contact CRA to set up a payment arrangement. Interest continues on the unpaid balance.
When do I have to pay tax by instalments?
When your net tax owing is more than $3,000 in the current year and in either of the two previous years. Instalments are due March 15, June 15, September 15 and December 15.
Sources: CRA, Interest and penalties on late taxes; Line 48500 Balance owing; 2026 indexation table (OAS threshold). RRSP withholding rates and instalment thresholds from CRA's RRSP and instalment pages. Checked October 2026.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.