What happens if I just ignore CRA collections letters and calls?

Ignoring the CRA makes things worse. Without contact or payment, the file is more likely to be assigned to a collections officer who can garnish wages, freeze accounts, or place liens. Engaging early and proposing a realistic payment plan is far better.

Can the CRA take my house?

The CRA can register a lien against property and, in extreme cases, seek a court certificate to seize and sell assets. In practice it will not usually force the sale of a primary residence except in the most extreme circumstances, but a lien can make it hard to sell or refinance until the debt is cleared.

Can the CRA come after a company’s directors personally?

Yes, for trust amounts like GST/HST and payroll source deductions. Through a director’s liability assessment, the CRA can assess directors personally — generally within two years of when they last served as a director — unless they can show they exercised due diligence.

How much of my pay can the CRA garnish?

Wage garnishments typically start around 30% and usually do not exceed 50%. A collections officer will often agree to lift the garnishment in exchange for a reliable monthly voluntary payment.

Is it illegal to owe the CRA money?

No. As tax professionals are fond of pointing out, it is illegal not to file, but it is not illegal not to pay. The right move when you cannot pay is to file on time anyway and arrange a payment plan — never to skip filing.

Should I open a new bank account if mine is frozen?

A Requirement to Pay is sent to a specific branch and does not automatically follow you to a new account, so banking elsewhere temporarily is sometimes necessary. The better long-term solution is to negotiate with the collector to lift the RTP. Consider professional help for this.

Dealing with CRA collections and tax debt

A tax debt to the CRA can feel like a constant weight, and the agency’s collections department is one of the most stressful parts of the system for business owners. But collections follows patterns, the CRA gives plenty of warning before acting, and there is almost always room to negotiate. This guide explains how CRA collections works, the powers a collector can use, and the practical steps that keep you in control of the situation.

When does the CRA start collecting?

To give you time to file an objection, a tax debt generally becomes subject to collections action 90 days after the date of assessment or reassessment, and the CRA typically does not act before then. After the notice is issued, the agency usually sends a general collections letter, and the call centre may follow up with a quick call after about 45 days.

Not every debt is assigned to a human collector. A CRA algorithm decides if and when to assign one. A practical takeaway from Victory Over the CRA: if you know a tax debt is coming, start making payments early — even modest monthly amounts by post-dated cheque. If the payments are reasonable relative to the size of the debt, the system often stays satisfied and you avoid being assigned a live collector.

What powers does a CRA collections officer have?

CRA collectors have an arsenal of powerful tools and use them regularly. Understanding them helps you appreciate why ignoring the CRA is the worst option.

Garnishing your wages (often around 30%, sometimes up to 50%)
Sending a "Requirement to Pay" to people who owe you money, redirecting those funds to the CRA
Freezing a bank account by issuing a Requirement to Pay to your bank branch
Registering a lien against property you own
Seizing and selling assets (with a Federal Court certificate, typically on 30 days’ notice)
Assessing a corporation’s directors personally for unpaid trust amounts (director’s liability)
Pursuing people who received assets from you for less than fair value (non-arm’s-length assessments)

How do I arrange a payment plan?

A payment arrangement is the most common resolution. The key is proper financial disclosure: showing the CRA your income, expenses, assets, and liabilities, then offering to pay as much as you reasonably can each month. Telephone agents routinely accept payment plans of up to 12 months, and a dedicated collections officer can agree to longer terms.

It is always better to make voluntary payments than to have your wages garnished — even for the same dollar amount. Voluntary compliance gives you credibility with the CRA and looks far better to any future collector than a record of having had to be forced to pay.

What is a "Requirement to Pay" and how does it affect my bank account?

A Requirement to Pay (RTP) directs a third party who owes you money — a customer, or your bank — to send those funds directly to the CRA instead. When sent to a bank, an RTP can freeze the account: money in it up to the amount owing is forwarded to the CRA, and deposits made while the freeze is in place go straight to the agency.

Importantly, an RTP goes to a specific bank branch the CRA knows about, not to every bank in the country, and it does not automatically reach a new account you open elsewhere. If your account is frozen, you generally need to either negotiate to have the RTP lifted or arrange to bank somewhere else temporarily while you resolve the debt. RTPs can usually be reduced or lifted through negotiation with a regular monthly payment.

Why is transferring assets to family so dangerous when you owe tax?

One of the most damaging traps is moving assets to a spouse, child, or other related person while you owe — or might owe — the CRA. Under section 160 of the Income Tax Act (and section 325 of the Excise Tax Act), if you transfer property to a non-arm’s-length person for less than fair market value while you have a tax debt, the CRA can assess the recipient for the lesser of your tax debt and the benefit they received.

In one real case, an elderly woman let her son deposit his pay into her account because his own accounts were frozen; even though the money flowed back out to him, the courts treated the deposits as a non-arm’s-length transfer and held her liable for his tax debt. The scarier version is that the transferor need not even be a tax debtor at the time of the transfer — a later reassessment of an earlier year can make the liability reach back. Always get advice before transferring assets to family if there is any chance of a tax debt.

This is general information, not legal or tax advice — for your own situation, consult a qualified accountant or tax lawyer.

Frequently asked questions

What happens if I just ignore CRA collections letters and calls?: Ignoring the CRA makes things worse. Without contact or payment, the file is more likely to be assigned to a collections officer who can garnish wages, freeze accounts, or place liens. Engaging early and proposing a realistic payment plan is far better.
Can the CRA take my house?: The CRA can register a lien against property and, in extreme cases, seek a court certificate to seize and sell assets. In practice it will not usually force the sale of a primary residence except in the most extreme circumstances, but a lien can make it hard to sell or refinance until the debt is cleared.
Can the CRA come after a company’s directors personally?: Yes, for trust amounts like GST/HST and payroll source deductions. Through a director’s liability assessment, the CRA can assess directors personally — generally within two years of when they last served as a director — unless they can show they exercised due diligence.
How much of my pay can the CRA garnish?: Wage garnishments typically start around 30% and usually do not exceed 50%. A collections officer will often agree to lift the garnishment in exchange for a reliable monthly voluntary payment.
Is it illegal to owe the CRA money?: No. As tax professionals are fond of pointing out, it is illegal not to file, but it is not illegal not to pay. The right move when you cannot pay is to file on time anyway and arrange a payment plan — never to skip filing.
Should I open a new bank account if mine is frozen?: A Requirement to Pay is sent to a specific branch and does not automatically follow you to a new account, so banking elsewhere temporarily is sometimes necessary. The better long-term solution is to negotiate with the collector to lift the RTP. Consider professional help for this.