Tax Advice

Dealing With a Canadian Tax Refund Delay? Here Are Some Reasons for the Holdup

Let’s face it: waiting is frustrating. Studies show that people lose patience quickly—whether it’s waiting for a web page to load or sitting at a traffic light. And when it comes to waiting for your tax refund, the stakes feel even higher. Most Canadians receive their refunds within two weeks when filing electronically or around eight weeks for a paper return. However, delays can occur for a variety of reasons.

From issues with your income tax return or missing supporting documents to complications like unreported taxable income or outstanding debts under the Family Orders and Agreements Enforcement Assistance Act, several factors might extend your processing time.

Here, we’ll explore five common reasons for tax refund delays, how the Canada Revenue Agency (CRA) handles processing returns, and steps you can take to speed up the process next time—because no one wants to spend weeks yelling, “Where’s my refund?!” into the void.

Reason #1: Your Tax Submission Is Missing Information or Contains Errors

One of the most common reasons for a delayed income tax refund in Canada is missing or incorrect information on your income tax return. Small mistakes, like a wrong Social Insurance Number (SIN) or mismatched names (for you, your common-law partner, or dependents), can cause processing delays with the Canada Revenue Agency (CRA). Always ensure that the names on your tax forms match those on file with the CRA and other federal systems.

Failing to report all your taxable income is another frequent issue. If you didn’t receive essential slips like a T3, T4, or T5 before filing, use your own supporting documents such as sales invoices, fee statements, or cash register tapes to provide the most accurate estimate of your total income. Excluding income—even unintentionally—can trigger penalties, interest charges, and additional reviews, further delaying your refund and potentially reducing its full amount.

Another avoidable error is entering incorrect bank account information for direct deposit. If your refund gets deposited into the wrong account, resolving the issue will require contacting your bank and may take considerable time. To avoid this, double-check your banking details and confirm the information in your CRA account service.

By filing accurate and complete returns, whether you’re a salaried worker, a sole proprietor, or self-employed, you can help ensure a smooth and timely refund process. For additional accuracy, consider using online services like certified tax software that guides you through error checks before submission.

Reason #2: You Filed a Paper Tax Return

If you’ve opted to file a paper return, your tax refund could take significantly longer to process. While the Canada Revenue Agency (CRA) strongly encourages taxpayers to file their income tax return electronically, some still submit paper returns. However, this method comes with delays—processing times for paper returns can extend up to eight weeks, compared to just two weeks for electronically filed returns.

Filing electronically offers several advantages:

• Fewer errors: Certified online services and tax software often include error checks, flagging issues like incorrect Social Insurance Numbers (SIN), or mismatched names before submission.
• Faster refunds: Electronic filing significantly reduces processing time, allowing you to receive your income tax refund sooner—an essential boost for your cash flow.
• Direct deposit: E-filing makes it easier to link your bank account for refunds via direct deposit, further speeding up the process.

If you work with a tax preparer, such as an accountant or bookkeeper, ensure they also file your tax return electronically to expedite the process. Filing close to the April 30th deadline? Avoid the rush by submitting early to reduce potential delays caused by a backlog.

Reason #3: Your Installment Payments Were Applied to the Wrong Account or Tax Year

Another common cause of delays is misapplied payments. The CRA processes payments according to the specific tax account and the tax year you indicate. Mistakes—like allocating payments to the wrong year—can result in an apparent outstanding balance, delaying your tax refund.

Here’s how to avoid this issue:

1. Verify payment details: When making payments through your online service or banking platform, ensure you’ve selected the correct options for both the account and the tax year. Options typically include:

• Paying balances from previous years.
• Paying taxes owed for the current tax year.
• Making installment payments for prepaying upcoming taxes.

2. Understand installment schedules: Installments for personal taxes are due quarterly on March 15, June 15, September 15, and December 15. Note that the March 15 installment applies to the previous year, while the June to December payments apply to the current tax year.

3. Separate business payments: If you’re a sole proprietor or self-employed and registered for GST/HST, use the correct business number (BN) for your payments. Confusing a BN with your Social Insurance Number (SIN) could result in payments being applied to the wrong account. If you also manage a private corporation, keep its payments separate to avoid misallocations.

By carefully reviewing your payment instructions and account details, you can avoid unnecessary delays in processing your tax return and receiving your refund. Whether you’re paying as a sole proprietor, filing as a self-employed individual, or submitting as part of a sole proprietorship, accuracy is key.

Reason #4: You May Be Claiming Certain Tax Credits and Deductions

Claiming specific tax credits or deductions can lead to delays in processing your income tax return. The Canada Revenue Agency (CRA) often requires additional documentation or verification for claims involving significant expenses or new credits. Here are some examples:

1. Tax credits needing verification:

• Moving expenses: Claims for relocation costs often trigger a pre-assessment request for supporting documents.
• Medical expense credits: Large claims for medical expenses undergo detailed reviews.
• Charitable donations: High-value donations are likely to attract closer scrutiny.
• Other credits such as the Federal Foreign Tax Credit, Tax Credit for an Eligible Dependent, and Canada Caregiver Credit may also warrant further checks, especially if it’s your first time claiming them.

2. What you need to do:

• Keep all supporting documents, like receipts and fee statements, on hand. These may include sales invoices, proof of payment, or any records related to your claims.
• If the CRA issues a pre-assessment request, promptly provide the required information to avoid delays.
• Respond within the timeframe indicated in the CRA notice to ensure your claim is processed smoothly.

3. Where to find notices:

• If you’re registered for online mail with the CRA, you can view these requests in your MyCRA account.

Failure to provide adequate documentation may result in your claims being denied or adjusted, which could reduce your refund or increase your tax balance owing. Staying prepared and proactive is the best way to avoid complications.

Reason #5: You May Owe Money or Have Unfiled Returns

Did you know tax refunds can be offset if you owe money to the CRA or other government agencies? Here’s how this works:

1. Offsets by the CRA:

• If you have an outstanding balance with the CRA for previous tax years, your refund will be applied to reduce that amount first.
• This applies to personal taxes, GST/HST returns, or other business-related accounts like those for a sole proprietorship.

2. Offsets by other agencies:

• Other government bodies, such as provincial healthcare programs or under the Family Orders and Agreements Enforcement Assistance Act, can request a lien on your refund.
• This includes debts like unpaid employment insurance overpayments or immigration loans.

3. Unfiled returns:

• Failing to submit all required income tax returns or GST/HST returns can delay your refund.
• Ensure that your filings for sole proprietorships or partnerships are up-to-date, as missing returns can cause the CRA to hold back refunds.

4. How to check:

• Log in to your MyCRA account to view notifications about any refunds being redirected. These notices will also appear on your notice of assessment, typically in the explanatory notes section.

To expedite your refund:

• Regularly review your account balance and ensure all taxes are paid in full.
• File all outstanding returns promptly, even if you expect to owe money.
• Double-check payments made to ensure they’re allocated to the correct tax year and account.

By keeping your account in good standing and your taxpayer obligations up to date, you can minimize delays and ensure a faster refund process.

Reason #6: Outstanding Debts Beyond Taxes May Affect Your Refund

Your refund might be reduced or delayed if you have other federal or provincial debts. These include overdue student loans, Employment Insurance overpayments, immigration loans, or amounts owed under the family orders and agreements enforcement assistance act. The CRA can redirect your refund to cover these debts, which will be reflected in your Notice of Assessment. Keeping your government debts clear helps ensure that you receive the full amount of your refund promptly.

Reason #7: Non-resident Returns Take Longer to Process

If you’re a non-resident of Canada filing a tax return for income earned in the country, expect longer processing times. Non-resident returns involve additional steps, including verifying tax treaty benefits and determining taxable income. Processing times for non-resident returns can extend beyond eight weeks, especially for those who file a paper return. Filing online and ensuring accuracy can help expedite the process.

Reason #8: Uncashed Cheques From Prior Years Can Hold Up Refunds

Uncashed cheques for refunds issued in previous tax years might delay the processing of your current refund. The CRA may require you to address these outstanding amounts first. Use the CRA’s online uncashed cheques service to check if you have any outstanding refund payments and request replacements if needed.

Reason #9: Prior Year Errors or Late Filings Cause Delays

Errors in previous tax years, such as unreported total income or unfiled returns for a sole proprietorship or other business activities, can hold up current tax refunds. If discrepancies are found, the CRA may pause the processing of your return to resolve these issues. Always ensure prior years’ taxes and business filings are accurate and complete to avoid setbacks.

Reason #10: Cra Reviews for High Deductions or Unusual Claims

If you claim unusually high tax deductions, such as medical expenses, donations, or business losses, the CRA may flag your return for review. This can lead to requests for additional supporting documents, which could delay your refund. Maintaining clear records and promptly responding to CRA requests helps keep processing times as short as possible.

Tips to Avoid Future Refund Delays:

1. File online: Returns filed online typically process within two weeks, compared to eight weeks or more for paper returns.
2. Update direct deposit info: Ensure your bank account details are correct each tax year.
3. Keep detailed records: Proper documentation of taxable income, deductions, and business-related expenses can prevent errors and reviews.
4. Resolve debts early: Clear any federal or provincial debts to avoid offsets against your refund.

Can’t Afford to Wait for Your Tax Refund?

For the 2024 tax year in Canada, there are ways to reduce your wait time for tax refunds or manage your finances proactively. One option is to adjust your payroll withholding or reduce your fourth-quarter installment payments, such as the March 15, 2024, installment for the prior tax year. By estimating your taxable income and tax liability early, you can ensure that less tax is deducted upfront, leaving you with more money now. However, this strategy means a smaller personal income tax refund when you file.

If your tax return processing is delayed, remember that the CRA compensates taxpayers for processing time beyond 31 days. In 2024, the CRA’s interest rate on overdue refunds is 10%, compounded daily. While this rate benefits taxpayers dealing with refund delays, the interest earned is taxable income and must be reported on your tax return for the following tax year.

To avoid delays, always file your taxes online. Returns filed online are typically processed within two weeks, while paper returns can take eight weeks or more to process. Direct deposit ensures faster access to your refund, so verify your bank account details when filing. Common errors, like incorrect Social Insurance Numbers, omitted tax deductions, or failing to report all income, can lead to delays. If you owe taxes, have an outstanding balance, or unfiled returns, the CRA may apply your refund to those debts, delaying when you receive the remaining funds.

For sole proprietors and self-employed individuals, filing early helps reduce risks of delays caused by complex returns, such as those involving employment insurance deductions, non-resident returns, or income from sole proprietorships. Always ensure accurate documentation, such as fee statements, uncashed cheques, and proof of total income, to expedite processing.

CRA aims to make refund processing as seamless as possible, but taxpayers should always check their notice of assessment or MyCRA account for updates on refund status. If you’re still Googling “how long for tax refund Canada” check out the CRA’s official website and try out the chatbot.

By staying organized and proactive, you can minimize refund delays and keep your financial health on track.

This post was updated in December 2024.