CRA Collections and Tax Debt Lawyers in Toronto
Facing CRA collection action or an outstanding tax balance? Our tax lawyers assist individuals and businesses with tax debt, payment arrangements and CRA enforcement matters.
Facing CRA Collections or an Outstanding Tax Debt?
Owing money to the Canada Revenue Agency (CRA) can lead to significant financial and legal consequences, particularly once an account has been assigned to collections.
Depending on the type of debt and the taxpayer’s circumstances, the CRA may apply refunds or credits against the balance, issue garnishments or Requirements to Pay, register liens, seize assets, or take other collection action authorized by law.
At KR Law Firm, our tax lawyers assist individuals, business owners, and corporations dealing with CRA collections and tax debt. We can review the amount owing, assess the CRA’s collection position, communicate with collections officers, advise on payment arrangements and available relief options, and address disputes or enforcement issues where appropriate.
What Happens When You Owe Money to the CRA?
If a tax balance is not paid by the applicable deadline, interest will generally continue to accrue and penalties may also apply depending on the type of obligation involved.
The CRA may initially contact the taxpayer regarding the outstanding balance and request payment or arrangements to address the debt.
If the debt remains unresolved, the CRA may take increasingly serious collection measures.
For many debts, the CRA generally provides a legal warning before beginning legal collection action. However, different rules can apply to certain business debts, including payroll and GST/HST remittance debts, where collection action may begin more quickly.
CRA Collection Powers and Enforcement Actions
The CRA has significant statutory powers to collect unpaid tax debts without using the same procedures that an ordinary private creditor would normally require.
Depending on the circumstances, CRA collection action may include:
Garnishing Wages, Bank Accounts, and Other Amounts Owed to You
The CRA may issue a garnishment requiring a third party that owes or holds money for the taxpayer to send some or all of that money directly to the CRA.
This can include:
- Employers;
- Banks and other financial institutions;
- Customers or clients;
- Business partners;
- Tenants;
- Government departments; or
- Other persons or entities that owe money to the taxpayer.
These garnishments may take the form of a Requirement to Pay (RTP), an Enhanced Requirement to Pay (ERTP), or another applicable demand.
Applying Tax Refunds and Government Payments to the Debt
The CRA may apply certain tax refunds, credits, benefits, or other government payments against an outstanding balance.
This can occur even where the taxpayer has entered into a payment arrangement with the CRA.
Registering the Debt and Placing a Lien on Property
The CRA may certify a tax debt and take steps that can result in a lien being registered against real property or other assets.
A registered lien can affect the taxpayer’s ability to sell, refinance, or otherwise deal with property.
Seizure and Sale of Assets
In some circumstances, the CRA may seize and sell assets to recover outstanding tax debt.
Because enforcement can escalate once legal collection action begins, taxpayers who receive a legal warning, Requirement to Pay, or other enforcement notice should obtain advice promptly.
What Is a CRA Requirement to Pay?
A Requirement to Pay is a powerful collection tool that allows the CRA to redirect money that a third party would otherwise pay to the taxpayer.
For example, the CRA may issue a Requirement to Pay to:
- An employer for wages or other remuneration;
- A financial institution holding funds;
- A customer who owes money to a business;
- A tenant who owes rent;
- A corporation or business partner; or
- Another person or organization holding or owing funds.
Once a valid garnishment is received, the third party may have a legal obligation to redirect the specified amounts to the CRA instead of paying the taxpayer.
CRA garnishments can significantly affect personal cash flow and business operations, so the underlying tax debt and available options should be assessed quickly.
CRA Payment Arrangements
If you cannot pay the full amount immediately, the CRA may agree to a payment arrangement that allows the debt to be paid over time.
The CRA generally considers the taxpayer’s financial situation and ability to make regular payments.
A payment arrangement may require disclosure of financial information such as:
- Income and expenses;
- Assets and liabilities;
- Banking information;
- Business cash flow;
- Other debts and obligations; and
- The taxpayer’s proposed payment schedule.
Interest generally continues to accrue on unpaid tax debt while a payment arrangement is in place.
Taxpayers must also remain current with future filing and payment obligations. If agreed payments are missed or future obligations are not met, the CRA may cancel the arrangement and resume collection action.
How Our Tax Lawyers Assist With CRA Collections
1. Review the Tax Debt and Collection Status
We review the assessments, reassessments, account balances, CRA correspondence, collection notices, and enforcement measures affecting the taxpayer.
This helps determine what amounts are owing, whether any portion remains disputed, and what stage the collection process has reached.
2. Communicate With CRA Collections Officers
Once authorized, our tax lawyers can communicate with CRA collections officers regarding the outstanding debt, financial circumstances, payment proposals, and other relevant issues.
3. Assess Payment Arrangement Options
Where full payment is not immediately possible, we can assist in evaluating a realistic payment proposal and addressing the information required by the CRA.
4. Review Garnishments and Other Enforcement Action
If the CRA has issued a Requirement to Pay, registered a lien, threatened seizure, or taken other collection action, we can review the legal and factual circumstances and advise on available options.
5. Identify Related Tax Dispute or Relief Options
Tax debt can involve more than collections alone.
Depending on the circumstances, the taxpayer may also need advice regarding:
- A disputed assessment or reassessment;
- A CRA Notice of Objection;
- A Tax Court appeal;
- Penalty and interest relief;
- A remission request; or
- Other available tax remedies.
Can You Dispute the Tax Debt While the CRA Is Collecting?
A collections officer generally deals with collecting an assessed amount rather than deciding whether the underlying assessment is legally correct.
If the amount owing results from an assessment or reassessment that you disagree with, the proper dispute process may involve filing a Notice of Objection or pursuing an existing tax appeal.
Learn more about our CRA tax objection services.
If the dispute has already proceeded beyond the objection stage, learn more about our Tax Court appeal representation.
Does Filing an Objection Stop CRA Collections?
Whether collection action is restricted while an objection or appeal is pending depends on the type of debt involved.
For many disputed income tax assessments, the CRA is generally restricted from taking certain collection action while the objection or Tax Court appeal remains unresolved.
However, significant exceptions apply.
Certain amounts may remain collectible despite an ongoing dispute, including some:
- GST/HST remittance debts;
- Payroll and source deduction debts;
- Amounts subject to special collection rules;
- Large-corporation amounts; and
- Other liabilities excluded from ordinary collection restrictions.
Interest may also continue to accrue even when collection action is postponed.
Because the applicable rules depend on the type of assessment and tax involved, the collection status of a disputed debt should be reviewed carefully.
CRA Tax Debt Collection Limitation Periods
CRA tax debts are subject to statutory collection limitation periods, but the applicable period depends on the type of debt.
Under the CRA’s current published guidance:
- Individual income tax debt: generally a 10-year collection limitation period;
- Corporate income tax debt: generally a 10-year collection limitation period;
- GST/HST remittance debt: generally a 10-year collection limitation period; and
- Payroll debt: generally a 6-year collection limitation period.
The calculation is more complicated than simply counting years from when the tax first became payable.
Certain actions by the taxpayer or the CRA can restart the limitation period, while other events can extend or suspend it.
Actions that may affect the limitation period can include:
- Proposing a payment arrangement;
- Certain acknowledgements of the debt;
- CRA garnishment or set-off activity;
- Application of refunds or credits against the debt;
- Certification of the debt in Federal Court;
- Seizure and sale proceedings;
- Bankruptcy or insolvency proceedings; and
- Other events identified in the applicable legislation.
For that reason, determining whether a CRA debt is still legally collectible requires a review of the debt history rather than relying only on the age of the assessment.
Can CRA Penalties and Interest Be Reduced?
The CRA has discretionary authority in certain circumstances to cancel or waive penalties and interest.
Potential grounds can include extraordinary circumstances, CRA delay or error, serious financial hardship, or other circumstances recognized under the taxpayer relief provisions.
Penalty and interest relief is separate from negotiating the principal tax debt. A collections officer generally cannot simply compromise a valid tax assessment because the taxpayer cannot afford to pay it.
Learn more about our CRA penalty and interest relief services.
Can the CRA Reduce the Principal Tax Owing?
Unlike some private creditors, the CRA generally does not have broad authority to negotiate an assessed tax debt simply by accepting a lower amount as a settlement.
There may, however, be separate legal or administrative mechanisms that can affect the amount ultimately payable, depending on the circumstances.
These may include:
- Successfully challenging the underlying assessment;
- Amending a tax return where permitted;
- Penalty and interest relief;
- Bankruptcy or a proposal under insolvency legislation;
- A remission request in exceptional circumstances; or
- Other statutory remedies.
Remission is an extraordinary form of discretionary relief and is generally considered only where other available remedies do not adequately address the circumstances.
Learn more about CRA remission orders.
CRA Collections for Businesses
Business tax debts can create particular urgency because unpaid payroll deductions and GST/HST remittances may be subject to more immediate collection action.
Business collections may involve:
- Corporate income tax balances;
- GST/HST remittances;
- Payroll and source deductions;
- Director liability assessments;
- Garnishments of business accounts or receivables;
- Requirements to Pay issued to customers;
- Liens and asset enforcement; and
- Payment arrangements based on business cash flow.
CRA enforcement against operating accounts or receivables can have a significant effect on a business’s ability to continue operating, making early review particularly important.
Director Liability and Corporate Tax Debt
In certain circumstances, directors may be personally assessed for particular corporate tax liabilities, including certain unremitted GST/HST and source deductions.
A director liability assessment is distinct from collection of the corporation’s debt and may raise separate statutory defences, limitation issues, and objection rights.
If the CRA has issued or threatened a director liability assessment, the assessment and applicable deadlines should be reviewed promptly.
Why Work With KR Law Firm on a CRA Collections Matter?
CRA collection matters can involve tax assessments, statutory enforcement powers, financial disclosure, payment negotiations, and related tax dispute procedures.
- Tax-Focused Legal Representation: Our practice focuses on Canadian tax matters and disputes involving the CRA.
- Assessment of Both Debt and Enforcement: We consider the underlying tax liability as well as the CRA’s collection actions.
- Direct CRA Representation: Once authorized, our tax lawyers can communicate with collections officers and address outstanding information or payment issues.
- Integrated Tax Dispute Strategy: Where the underlying assessment remains disputed, we can assess objection or Tax Court options alongside the collection matter.
- Relief and Payment Options: Where appropriate, we can identify payment arrangements, taxpayer relief, remission, or other available remedies.
Frequently Asked Questions About CRA Collections and Tax Debt
Can the CRA freeze my bank account?
The CRA can garnish funds held by a financial institution through its statutory collection powers. Depending on the document issued and the circumstances, funds that would otherwise be available to the taxpayer may instead be required to be paid to the CRA.
Can the CRA garnish my wages?
Yes. The CRA may issue a Requirement to Pay or other garnishment requiring an employer to redirect specified amounts from wages or other remuneration to the CRA.
Can the CRA garnish business receivables?
Yes. The CRA may issue garnishments to customers, clients, or other parties that owe money to a business, requiring those amounts to be redirected to the CRA.
Can I make monthly payments to the CRA?
A payment arrangement may be available if you cannot pay the debt in full immediately. The CRA may review your financial circumstances and require a payment schedule based on your ability to pay. Interest generally continues to accrue while the balance remains unpaid.
Can the CRA put a lien on my house?
The CRA can take legal steps to register a tax debt against property. A registered lien can affect the taxpayer’s ability to sell or refinance the property.
How long can the CRA collect tax debt?
The limitation period depends on the type of debt. Individual and corporate income tax debts and GST/HST remittance debts are generally subject to a 10-year collection limitation period, while payroll debts are generally subject to a 6-year period. Various actions and events can restart or extend these periods.
Does making a payment restart the CRA limitation period?
The effect of a payment or other acknowledgement depends on the applicable debt and legislation. Various taxpayer and CRA actions can restart or extend the collection limitation period, so the complete collection history should be reviewed before reaching a conclusion.
Will filing an objection stop CRA collections?
For many income tax assessments, collection action is generally restricted while a valid objection or Tax Court appeal is pending. However, important exceptions apply, including certain GST/HST, payroll, source deduction, and other amounts.
Can the CRA forgive my tax debt?
The CRA generally cannot simply negotiate away validly assessed principal tax because a taxpayer is unable to pay. Separate remedies may be available in particular circumstances, including challenging the assessment, taxpayer relief for penalties and interest, insolvency proceedings, or remission in exceptional cases.
Can penalties and interest be waived?
The CRA may cancel or waive penalties and interest in certain circumstances under the taxpayer relief provisions. Eligibility depends on the facts and the applicable criteria.
What should I do if I receive a CRA Requirement to Pay?
A Requirement to Pay indicates that the CRA has moved into legal collection action involving a third party that owes or holds money for you. Because this can directly affect wages, bank accounts, or business receivables, the underlying debt and collection status should be reviewed promptly.
Speak With a CRA Collections & Tax Debt Lawyer
If you are dealing with an outstanding CRA balance, a collections officer, a Requirement to Pay, wage or bank garnishment, a tax lien, or other enforcement action, KR Law Firm can review your situation and advise you on the next steps.
Early advice can be particularly important where the debt involves business operations, payroll or GST/HST remittances, disputed assessments, significant penalties and interest, or active CRA enforcement.
Contact KR Law Firm to Book a Free Consultation with one of our tax lawyers.