CRA Collections: Garnishment, Frozen Accounts, and How to Stop Them

The CRA does not sue you to collect a tax debt. It does not need to. Under section 224 of the Income Tax Act, the CRA can issue a Requirement to Pay (RTP) directly to your bank, your employer, or anyone else who owes you money, and that third party is legally required to send the money to the CRA instead of to you. No court order, no hearing, no advance notice beyond the original assessment. Your bank account gets frozen. Your wages get garnished. The money is gone before you know it is happening. This page covers what the CRA can do, what it cannot do, the timeline, and the five paths that can stop or slow the collection machinery.

What is a Requirement to Pay?

A Requirement to Pay is the CRA’s primary collection tool. Under section 224(1), the CRA can send a notice to any person who owes money to the tax debtor (or who will owe money in the future, such as an employer owing wages) requiring that person to pay some or all of that money to the CRA instead. The recipient of the RTP must comply; failure to do so makes the recipient personally liable for the amount (section 224(4)).

In practice, the CRA sends RTPs to banks (freezing accounts), employers (garnishing wages), clients who owe the taxpayer money (accounts receivable), and sometimes to tenants paying rent to a landlord who owes taxes. The RTP can be for a specific amount or for a continuing obligation (for example, garnishing 50% of each future paycheque until the debt is paid).

The CRA also has enhanced powers under section 224(1.2), which allows it to require “forthwith” payment from a person who is otherwise about to make a payment to the tax debtor. This is the provision used to freeze bank accounts: the bank is about to return the depositor’s money on demand, and the CRA requires the bank to send it to the CRA instead.

There is no prior judicial approval required. The CRA does not need to convince a judge that collection is warranted. The tax assessment itself is the authority, and the assessment is presumed correct unless and until it is overturned by an objection or court decision (section 152(8)).

When can the CRA start collecting?

The CRA cannot begin collection action immediately after issuing an assessment. Section 225.1 imposes a waiting period: for individuals, the CRA must wait 90 days after the day the notice of assessment is sent before taking collection action. For corporations, the waiting period is also 90 days. During this window, you can file a notice of objection, and once an objection is filed, collection is suspended on the disputed amounts until 90 days after the CRA’s decision on the objection, or until any Tax Court appeal is resolved.

The critical word is “disputed amounts.” If you owe $50,000 across three tax years and you object to only one year ($20,000), the CRA can collect on the undisputed $30,000 immediately after the 90-day waiting period. The collection hold under section 225.1 covers only the amounts under active objection or appeal.

There are exceptions to the hold. The CRA can collect during the objection period if it can establish that the delay would jeopardize collection (for example, the taxpayer is about to leave Canada with assets, or is dissipating assets). This requires a “jeopardy order” under section 225.2, which the CRA must obtain from a judge. Jeopardy orders are uncommon but not rare in cross-border situations where the taxpayer has recently emigrated or is in the process of leaving.

What does a frozen bank account look like?

The bank receives the RTP and immediately restricts access to the account. The freeze typically covers the full balance up to the amount of the tax debt. You cannot withdraw, transfer, or use debit on the frozen funds. The bank may allow new deposits into the account, but those deposits may also be captured by the RTP depending on its terms.

The freeze is not permanent. It lasts until the CRA releases the RTP (because the debt is paid, an arrangement is reached, or an objection suspends collection) or until the bank has remitted the full amount to the CRA. If the RTP is a one-time demand, the bank sends the money and the account reopens. If the RTP is continuing, the bank sends each new deposit (or a portion of it) to the CRA as it arrives.

For cross-border filers, the freeze creates an immediate cash flow crisis. If your Canadian bank account is your primary account and you live in the US, you may not discover the freeze until a payment bounces or a transfer fails. The CRA does not call you before freezing the account. The first notice is often the absence of your money.

Can I stop the garnishment?

Five paths, roughly in order of effectiveness:

1. File a notice of objection. If you are within the objection deadline (90 days from the assessment, or one year from filing-due date for individuals, whichever is later), filing an objection triggers the section 225.1 collection hold. The CRA must release any RTP on the disputed amounts. This is the strongest and fastest path, but it only works if the deadline has not passed and you have a legitimate basis for the objection.

2. Negotiate a payment arrangement. Call the CRA collections unit (the number on your assessment or the general collections line) and propose a payment plan. The CRA has discretion to accept monthly payments over a period it considers reasonable, based on your ability to pay. The CRA will ask you to complete a financial disclosure (similar to what the IRS asks for, covering income, expenses, and assets). If the CRA accepts the arrangement, it will release or modify the RTP. Interest continues to accrue on the unpaid balance during the arrangement.

3. Request taxpayer relief. If penalties and interest are a significant portion of the debt, a taxpayer relief request on Form RC4288 can reduce the total owing. The CRA has discretion under section 220(3.1) to cancel or waive penalties and interest for up to ten years back. If successful, the reduced balance may be payable immediately or through a shorter payment arrangement. The CRA does not automatically hold collections while a relief request is pending, but you can ask the collections officer to hold action while the request is processed.

4. Apply for a late objection extension. If you missed the objection deadline by less than one year, section 166.1 lets you apply to the CRA for an extension. If the CRA refuses, section 166.2 lets you apply to the Tax Court. If the extension is granted and the objection is filed, the collection hold kicks in.

5. Insolvency proceedings. As a last resort, a consumer proposal or bankruptcy filing under the Bankruptcy and Insolvency Act triggers an automatic stay of proceedings that stops CRA collection. The tax debt is included in the insolvency process. This is a nuclear option with significant consequences (credit impact, asset surrender in bankruptcy, trustee fees), and it should only be considered when the debt is large enough to justify it and the other paths have failed. Insolvency does not discharge all tax debts: debts arising from fraud or misrepresentation, and certain trust amounts (GST/HST, source deductions), survive bankruptcy.

What about wage garnishment specifically?

The CRA can garnish up to 50% of an employee’s wages through a continuing RTP to the employer. The employer must comply; paying the employee the full amount after receiving an RTP makes the employer liable for the CRA’s portion (section 224(4)). There is no statutory minimum that the CRA must leave the taxpayer, unlike some provincial wage-garnishment laws that protect a basic living amount. In practice, the CRA usually garnishes 25% to 50% depending on the taxpayer’s circumstances.

If the garnishment creates genuine hardship (you cannot pay rent, buy food, or cover essential medical costs), call the collections officer and request a reduction. The CRA has discretion to reduce the garnishment percentage. Bring a detailed budget showing your essential expenses. “I can’t afford it” without documentation will not move the needle.

For self-employed taxpayers, the CRA can issue RTPs to clients who owe money for services rendered. This effectively cuts off accounts receivable. If your income depends on a small number of clients and the CRA issues RTPs to all of them, the business impact is immediate and severe. Negotiating a payment arrangement before the CRA reaches your client list is the practical priority.

Does the CRA collect across borders?

Yes, under limited circumstances. Article XXVIA of the Canada-US treaty provides for mutual assistance in collection between Canada and the US. The CRA can ask the IRS to collect a Canadian tax debt from a person living in the US, and the IRS can ask the CRA to collect a US tax debt from a person living in Canada. The treaty limits this assistance to “revenue claims that have been finally determined,” meaning the assessment must be past the objection and appeal stages.

In practice, cross-border collection assistance is uncommon for individual tax debts under $100,000. The administrative burden of inter-agency coordination makes it impractical for small amounts. But for large debts, emigration does not put the debt beyond reach. The CRA can also register a certificate of debt in the Federal Court under section 223, which has the same force as a Federal Court judgment and can theoretically be enforced in foreign jurisdictions under reciprocal enforcement arrangements.

The more immediate cross-border risk is not treaty collection but interception of Canadian-source payments. If you left Canada and still receive rental income, pension payments, or investment income from Canadian sources, the CRA can issue RTPs to the payers. Your Canadian rental tenant, your RRSP institution, or your Canadian employer pension plan can all be required to send payments to the CRA instead of to you.

What is the CRA’s collection limitation period?

The CRA has 10 years from the date of the assessment to collect a tax debt, under section 222(3). After 10 years, the debt becomes statute-barred and the CRA can no longer take collection action. However, the 10-year clock can be restarted or extended in several ways: the taxpayer acknowledges the debt (including by making a partial payment), the CRA obtains a court order, or the taxpayer is outside Canada (the clock pauses while the taxpayer is a non-resident under section 222(5)).

The non-resident pause is the one that catches cross-border filers. If you owe the CRA $30,000 and move to the US, the 10-year clock stops running for the entire time you are outside Canada. Move back 15 years later, and the clock resumes where it left off. The debt does not expire while you are abroad.

What should I do next?

If the CRA has already frozen your account or garnished your wages, call the collections officer immediately (the number is on the RTP notice or your assessment). Ask whether you are within the objection window; if so, file the objection and the freeze should be released on the disputed amounts. If outside the objection window, propose a payment arrangement with a budget that shows your essential expenses. If penalties and interest are a large portion of the debt, file an RC4288 taxpayer relief request in parallel.

If you have not yet been contacted by CRA collections but know you owe a balance, do not wait for the RTP. Contact the CRA proactively to set up a payment arrangement before the garnishment machinery activates. Proactive contact is always better than reactive.

If the debt involves a corporation’s unremitted source deductions or GST/HST, the CRA may also pursue the directors personally under section 227.1. If a taxpayer has died with CRA debt, the estate (not the children) is responsible for paying it; see deceased parent’s CRA/IRS debt for the clearance certificate process and what happens when the estate cannot pay.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.