CRA Collections: Wage Garnishment, Frozen Bank Accounts and Tax Liens

Facing CRA Collection Action?

If you owe money to the Canada Revenue Agency (CRA), the CRA has significant statutory powers to collect unpaid tax debts.

Depending on the circumstances, collection action may include Requirements to Pay directed to employers or financial institutions, set-offs of amounts otherwise payable to you, registration of tax debts against property, and other enforcement measures.

This guide explains common CRA collection actions, what a Requirement to Pay means, how bank accounts and wages may be affected, when collection restrictions may apply, and what options may be available to resolve an outstanding tax debt.

For legal assistance with an active CRA collection matter, visit our CRA collections and tax debt lawyers page.

Quick Answer: What Should You Do First?

Identify the debt: confirm which tax years, reporting periods, penalties, interest, or other amounts are outstanding.
Read all CRA correspondence: determine whether the matter is at the payment-request stage or whether legal collection action has already begun.
Determine whether the assessment is disputed: if you believe the tax was assessed incorrectly, objection or appeal rights may still be relevant.
Do not ignore a Requirement to Pay: if the CRA has contacted your employer, bank, customer, or another third party, the matter should be addressed promptly.
Assess your ability to pay: a payment arrangement may be available where immediate payment in full is not possible.
Consider professional advice: particularly where accounts have been frozen, wages are being garnished, property is affected, or substantial amounts are involved.

What Is CRA Collections?

CRA Collections is the process through which the CRA seeks payment of outstanding tax and other government debts that it is authorized to collect.

A collection matter may involve:

Personal income tax debt;
Corporate income tax debt;
GST/HST;
Payroll source deductions;
Penalties and interest;
Director liability assessments;
Certain government benefit or program debts; or
Other amounts administered or collected by the CRA.

The CRA’s collection powers are created by legislation and can be broader than the remedies available to an ordinary private creditor.

For official information about CRA collection policies, see Tax Collections Policies.

What Is a CRA Requirement to Pay?

A Requirement to Pay is a legal collection mechanism that can require a third party who owes or holds money for a taxpayer to redirect funds to the CRA instead.

Depending on the circumstances, a Requirement to Pay may be directed to:

An employer;
A bank or other financial institution;
A customer or client who owes money to a business;
A tenant;
A contractor;
A person making payments to the taxpayer; or
Another third party that holds or owes funds.

The effect of a Requirement to Pay depends on the applicable legislation, the type of debt, the third party involved, and the wording of the notice.

Can the CRA Garnish Your Wages?

Yes. The CRA can use a Requirement to Pay to require an employer to send amounts otherwise payable to an employee to the CRA toward an outstanding tax debt.

This is commonly referred to as a wage garnishment.

The amount affected depends on the terms of the Requirement to Pay and the taxpayer’s circumstances. There is not one universal percentage that applies to every CRA wage garnishment.

If wages are already being redirected, the taxpayer should determine:

Which debt is being collected;
Whether the assessment is still disputable;
Whether any collection restriction applies;
Whether a payment arrangement is feasible; and
Whether the CRA may reconsider the collection approach based on the taxpayer’s financial circumstances.

Can the CRA Freeze or Seize Money From a Bank Account?

The CRA may issue a Requirement to Pay to a bank or other financial institution holding funds for a taxpayer.

Once the financial institution receives the notice, funds that are subject to the Requirement to Pay may be required to be remitted to the CRA.

Taxpayers often describe this as a frozen bank account because access to funds may become restricted while the institution responds to the CRA’s demand.

If a bank account has been affected, it is important to review the CRA notice and the underlying tax debt promptly rather than assuming that the bank itself can resolve the issue.

Can the CRA Register a Lien Against Property?

The CRA may take steps to secure an unpaid tax debt against property.

Depending on the applicable legislation and enforcement process, the CRA may certify the debt and register it against real property or other assets.

A registered tax debt can create significant practical problems when the taxpayer wants to:

Sell the property;
Refinance a mortgage;
Obtain additional financing;
Transfer ownership; or
Deal with other secured creditors.

In some cases, the CRA may also pursue seizure and sale remedies where the statutory requirements for enforcement are satisfied.

Can the CRA Take Your Tax Refund or Benefits?

The CRA may apply certain amounts otherwise payable by the federal government toward an outstanding debt.

This is commonly called a set-off.

Depending on the type of debt and payment, amounts that may potentially be applied against a debt can include:

Income tax refunds;
GST/HST credits;
Certain benefit or credit payments; and
Other federal amounts payable to the taxpayer.

Some payments may be protected or subject to different rules, so the result depends on the specific benefit or credit involved.

The CRA may also continue to apply certain federal payments against a debt even when a payment arrangement is in place.

Does the CRA Need a Court Order to Collect Tax Debt?

Not for every type of collection action.

Tax legislation gives the CRA statutory collection powers that can allow it to take certain enforcement steps without first obtaining the type of court judgment that an ordinary private creditor would generally require.

However, different enforcement mechanisms have different statutory requirements and procedural rules.

Whether the CRA can take a particular collection step depends on the type of tax debt, the stage of the dispute, applicable collection restrictions, and any statutory exceptions.

Can the CRA Collect While You Are Filing a Notice of Objection?

It depends on the type of assessment.

For many disputed amounts assessed under the Income Tax Act, collection restrictions generally prevent the CRA from taking certain collection actions during specified periods while the taxpayer exercises objection and appeal rights.

However, there are important exceptions.

Collection restrictions may not apply in the same way to:

GST/HST amounts;
Payroll source deductions and other deemed-trust amounts;
Certain large-corporation amounts;
Amounts where collection is considered to be in jeopardy; and
Other categories specifically excluded by legislation.

If you believe the assessment itself is incorrect, see our Notice of Objection (T400A) guide.

What If the CRA Collection Debt Came From an Audit?

CRA collection action often follows an assessment or reassessment that has already been issued.

If the debt arose from a CRA audit and you disagree with the resulting reassessment, it is important to determine whether objection rights remain available.

The collection strategy and the tax-dispute strategy should be coordinated because paying or addressing enforcement does not necessarily resolve whether the underlying assessment is legally correct.

If the matter began with an audit, see our CRA Audit Letter: What to Do Next guide.

Can You Make a Payment Arrangement With the CRA?

Yes. If you cannot pay a CRA debt in full immediately, a payment arrangement may be available.

The CRA may review the taxpayer’s income, expenses, assets, liabilities, and overall ability to pay before agreeing to a payment schedule.

Depending on the account and type of debt, taxpayers may be able to schedule payments through CRA online services or arrange payments directly with the CRA.

A payment arrangement does not normally eliminate the tax debt, and interest can continue to accrue on unpaid amounts.

The taxpayer must also remain compliant with the agreed payment schedule and ongoing filing and payment obligations.

For official information, see the CRA’s payment arrangement guidance.

What Happens If You Miss a CRA Payment Arrangement?

A payment arrangement is not simply an informal promise to pay.

If a taxpayer agrees to a payment schedule but does not make the required payments, the CRA may reconsider the arrangement and proceed with collection action.

If financial circumstances change and the agreed payment is no longer manageable, the taxpayer should address the issue before simply missing payments.

Can Form RC4288 Reduce CRA Tax Debt?

Form RC4288 may be used to request cancellation or waiver of eligible penalties and interest under the taxpayer relief provisions.

However, taxpayer relief generally does not cancel principal tax that was validly assessed.

Relief may be considered in circumstances involving extraordinary events, CRA actions or delays, financial hardship, or other qualifying circumstances.

For more information, see our CRA Form RC4288 taxpayer relief guide.

Does Filing RC4288 Stop CRA Collections?

No. Filing a taxpayer relief request does not automatically stop collection action.

A taxpayer who has an active RC4288 request should therefore address any outstanding collection matter separately rather than assuming that enforcement is suspended while the relief request is under review.

Can a Notice of Objection Reduce the Tax Debt?

A Notice of Objection does not negotiate or compromise a valid tax debt simply because the taxpayer cannot afford to pay it.

Instead, an objection challenges whether an assessment or reassessment is legally or factually correct.

If the objection succeeds, the CRA may vacate or vary the assessment, which can reduce or eliminate the disputed tax debt.

If the assessment is correct but payment is difficult, a payment arrangement or another debt-management option may be more relevant.

Can the CRA Negotiate the Principal Tax Owing?

The CRA generally does not negotiate validly assessed principal tax in the same way a private creditor might negotiate an unsecured debt.

Different mechanisms address different problems:

Notice of Objection: challenges whether the assessment is correct;
Payment arrangement: allows an accepted debt to be paid over time;
Taxpayer relief: may cancel or waive eligible penalties and interest;
Remission: is an extraordinary remedy that may be considered in exceptional circumstances; and
Insolvency proceedings: may affect tax debts in appropriate cases under Canadian insolvency legislation.

For extraordinary relief involving tax, penalties, or interest, see our CRA remission order services.

What About a Consumer Proposal or Bankruptcy?

In some situations, a taxpayer who cannot realistically repay their total debt may need advice about options under the Bankruptcy and Insolvency Act.

Consumer proposals and bankruptcy are administered by Licensed Insolvency Trustees, not by the CRA or a tax lawyer acting in place of a trustee.

A tax lawyer may nevertheless assist in identifying disputed assessments, tax consequences, director-liability issues, collection exposure, and other legal matters that should be considered alongside insolvency advice.

What Should You Do If Your Wages Are Being Garnished?

If the CRA has already issued a Requirement to Pay to your employer, acting promptly is important.

Steps may include:

Confirming the amount and type of debt;
Reviewing whether the assessment can still be disputed;
Determining whether collection restrictions apply;
Preparing accurate financial information;
Assessing whether a payment arrangement is feasible; and
Communicating with the CRA regarding an appropriate resolution.

What Should You Do If Your Bank Account Is Frozen?

If a bank has restricted access to an account because of a CRA Requirement to Pay, obtain and review the relevant collection information as quickly as possible.

The immediate questions usually include:

Which CRA account created the debt;
How much is outstanding;
Whether the bank has already remitted funds;
Whether there are other active Requirements to Pay;
Whether the underlying assessment is disputed; and
What payment or dispute options remain available.

How Our Tax Lawyers Assist With CRA Collections

Review the tax debt and CRA collection history;
Identify active Requirements to Pay, garnishments, registrations, or other enforcement measures;
Determine whether the underlying assessment can still be challenged;
Advise on collection restrictions during an objection or appeal;
Communicate with CRA Collections as an authorized representative;
Assist with payment arrangement discussions;
Coordinate taxpayer relief requests where penalties or interest may qualify for relief;
Address related director-liability or corporate tax issues where applicable; and
Advise on litigation or other tax-law remedies where necessary.

Frequently Asked Questions About CRA Collections

Can the CRA garnish my wages without a court judgment?

The CRA has statutory powers that can allow it to issue a Requirement to Pay directly to an employer without first obtaining the type of civil court judgment normally required by a private creditor.

How much of my wages can the CRA garnish?

There is no single percentage that applies to every case. The amount affected depends on the Requirement to Pay, the applicable legislation, the taxpayer’s circumstances, and the payments being made by the employer.

Can the CRA freeze my bank account?

The CRA can issue a Requirement to Pay to a financial institution. Funds subject to the notice may then be restricted and required to be remitted to the CRA toward the outstanding debt.

Does a CRA lien mean I cannot sell my property?

A registered tax debt can complicate a sale or refinancing because the CRA’s secured claim may need to be addressed as part of the transaction. The precise effect depends on the registration, property, other secured creditors, and circumstances of the transaction.

Will a payment arrangement stop interest?

Generally, no. Interest normally continues to accrue on unpaid amounts even when the CRA has agreed to a payment arrangement.

Does filing a Notice of Objection stop collections?

Collection restrictions apply to many disputed income-tax assessments, but important exceptions exist, including GST/HST, source deductions, deemed-trust amounts, large-corporation rules, and jeopardy situations.

Does filing RC4288 stop collections?

No. A taxpayer relief request does not automatically suspend CRA collection action.

Can a tax lawyer make the CRA forgive my principal tax debt?

A validly assessed tax debt generally cannot simply be negotiated away. A lawyer may challenge an incorrect assessment, seek eligible penalty and interest relief, negotiate payment arrangements, assess remission in exceptional cases, or coordinate with insolvency professionals where appropriate.

Speak With a Tax Lawyer About CRA Collection Action

If the CRA has garnished wages, issued a Requirement to Pay to your bank, registered a tax debt against property, or is pursuing other collection action, the available options depend on the type of debt and the stage of enforcement.

KR Law Firm assists individuals and businesses with CRA collections, disputed assessments, payment arrangements, taxpayer relief, and related tax matters across Canada.

Book a Free Consultation with one of our tax lawyers to discuss your CRA collection matter.