CRA Collections Powers: What the CRA Can Seize, Freeze and Garnish

Overview: What the CRA Can Do to Collect a Tax Debt

If the CRA has frozen your bank account or sent a notice to your employer, the question you want answered first is whether it can actually do that without going to court. It can. The CRA is not an ordinary creditor, and the collection tools available to a CRA collections officer do not require a judgment, a lawsuit or, in most cases, any advance warning to you at all.

That is the uncomfortable starting point. The better news is that those powers are bounded. Some of them cannot be used at all until ninety days have passed. Some of them cannot be used while a tax dispute is live. Some of them carry a statutory expiry date. And the single most common mistake taxpayers make, which is to say nothing and hope the file goes quiet, forfeits almost every one of those protections.

This article sets out what the CRA can do to collect a tax debt, what it cannot do, how the rules differ depending on which tax you owe, and what an experienced Canadian tax lawyer can do about it. Our firm has been resolving CRA back taxes owing and collection problems since 1987. The CRA’s own administrative position on most of this is published in Information Circular IC98-1R8, Tax Collections Policies, which replaced IC98-1R7 on May 24, 2022.

This article covers the powers themselves. For the end-to-end process, including the 90-day rule, the limitation period and how to stop enforcement, see our guide to CRA tax collections and how to deal with tax debt.

Background: How a Tax Debt Becomes Collectible

A tax debt becomes collectible when the CRA issues a notice of assessment or reassessment and the amount shown is not paid. Interest begins running the day after the balance is due, compounds daily at the prescribed rate, and applies to penalties as well as tax.

Nothing about this process requires the CRA to persuade a court that you owe the money. An assessment is presumed valid until it is displaced, and the collections branch treats the assessed figure as the debt. That presumption is why the dispute route and the collections route have to be managed together rather than one after the other.

The file usually moves through a predictable sequence. Automated notices come first, then telephone contact from a collections officer, then a legal warning letter, then enforcement. Collections officers sometimes attend in person at a home or a business address. None of that is a legal step, and taxpayers are frequently rattled into disclosures they did not have to make. Section 15 of the Taxpayer Bill of Rights confirms the right to be represented by a person of your choice, and once a Canadian tax litigation lawyer is retained, the CRA deals with the representative rather than with you directly.

Where a payment arrangement is being negotiated, the CRA will ask for supporting documentation of income, expenses, assets and liabilities, and IC98-1R8 confirms that a collections officer may verify that information before accepting the arrangement. What the CRA asks for and what it is entitled to are not always the same thing, which is the practical reason to have representation before the financial disclosure starts rather than after.

Key Issues and Findings: The Collection Powers in Detail

Requirements to Pay and Garnishment

The requirement to pay, issued under subsection 224(1) of the Income Tax Act, is the CRA’s most disruptive and most frequently used tool. It is a direction to a third party who owes you money, or who holds money for you, to pay the CRA instead. No court order is needed. A requirement to pay issued to an employer operates as a wage garnishment. Issued to a bank, it captures the account balance, and in practice the bank will typically freeze the account on receipt, so funds become inaccessible before any money is remitted to the CRA.

The reach is broader than most taxpayers expect. The CRA can direct a requirement to pay at accounts receivable of a business, which is commercially damaging in a way that goes well beyond the dollars collected, because it tells customers that the business has a tax problem. An enhanced requirement to pay under subsection 224(1.1) extends to institutions lending or advancing money.

Third parties who ignore a requirement to pay do not escape by simply not paying the tax debtor. If the liability to pay the tax debtor existed, the third party can be assessed personally for the amount. The equivalent GST/HST power sits in section 317 of the Excise Tax Act. The mechanics of these notices, and the position of a third party who receives one, are covered in detail in our article on CRA garnishments and requirements to pay.

Registered plans are the notable limit. Because a registered retirement savings plan is a trust, the trustee is not liable to pay the annuitant until the annuitant requests the funds, so there is nothing for a requirement to pay to attach to. The CRA can freeze the plan, preventing deposits and withdrawals, but cannot reach inside it. Payments actually flowing out of a registered retirement income fund are a different matter and can be captured.

Set-off

Separately from garnishment, the CRA can and routinely will apply amounts the federal government owes you against your tax debt. This covers income tax refunds, goods and services tax and harmonized sales tax credits, and benefit payments. IC98-1R8 confirms that set-off can be applied even where the underlying amount is under objection or appeal, which makes it one of the few collection actions that survives a live dispute.

Certification in Federal Court

If the debt remains unpaid, the CRA registers a certificate in the Federal Court under section 223 of the Income Tax Act. This is done without notice. Once registered, the certificate has the same effect as a judgment obtained after a trial, and it unlocks the enforcement measures that follow.

Registration also makes you liable for the reasonable costs and charges the CRA incurs in collecting a certified amount, which are added to the debt before any sale proceeds are applied against it.

Seizure, Sale and Liens

With a certificate registered, the CRA can obtain a writ, direct a sheriff or bailiff to seize personal property, and have it advertised and sold. It can also register liens against real property, which is commonly the first step taken after certification. A lien on a home operates much as a mortgage does, and taxpayers who subsequently negotiate a payment arrangement are routinely dismayed to learn that the CRA will usually not discharge the lien until the balance is paid in full.

Collections Restrictions: The Ninety-Day Rule

Section 225.1 of the Income Tax Act bars the CRA from starting court proceedings, certifying the debt, issuing a requirement to pay, or making a direction under subsection 225(1) until ninety days after a notice of assessment or reassessment is sent. This is a statutory prohibition, not an internal courtesy, and the distinction matters: a collection action taken inside the restricted period is unlawful rather than merely aggressive.

Filing a notice of objection or an appeal to the Tax Court of Canada extends that protection for income tax amounts while the dispute is outstanding. That is the single strongest reason to treat the objection deadline as a collections deadline as well as a dispute deadline.

Where the Ninety-Day Rule Does Not Apply

The restrictions are narrower than they look, and this is where most taxpayers and a good many advisors go wrong. The protection turns on which tax is owed.

There are no collections restrictions in the Excise Tax Act. A GST/HST debt can be collected immediately, and filing an objection or an appeal does not stop collection. The same is true of the Air Travellers Security Charge Act.

Amounts deemed to be held in trust are outside the restrictions entirely. That covers income tax, Canada Pension Plan contributions and employment insurance premiums deducted from employees, and GST/HST collected net of allowable input tax credits. A business that is behind on source deductions or GST/HST remittances has no collections breathing room at all, and this is the fact pattern that most often ends in a corporation being put out of business. The deemed trust also gives the CRA a super priority over secured creditors that arises by operation of law, with no registration required.

Payroll deduction assessments, scientific research and experimental development amounts under Part VIII, non-resident tax under section 116 and subsection 215(4), and tax owing from a tax shelter donation for 2013 and later years are all carved out. So are reassessments issued with the taxpayer’s consent under subsection 152(4.2), reassessments after disposition of an appeal under subsection 169(3), and reassessments following penalty or interest relief under subsection 220(3.1).

Large corporations as defined in subsection 225.1(8) must immediately pay half of an assessed amount, and under subsection 225.1(7) the CRA may collect that enforceable balance at any time after the notice is sent, whether or not an objection or appeal has been filed. Under the Excise Act, 2001 and the Greenhouse Gas Pollution Pricing Act, where assessed and unpaid amounts exceed one million dollars, the CRA may collect up to half during the ninety-day window.

Because the rule turns on the tax type, the first step in any collections file is to confirm precisely what is owing, by year and by tax type. A taxpayer who assumes the ninety-day protection applies across the board, when a material part of the balance is GST/HST or source deductions, is planning around a protection that does not exist.

Jeopardy Orders

Where the CRA has reasonable grounds to believe that collection would be jeopardized by delay, subsection 225.2(2) of the Income Tax Act allows it to apply to a judge, ex parte, for authorization to collect immediately notwithstanding section 225.1. The disclosure obligations the CRA carries on such an application are examined in our article on the CRA’s ex parte jeopardy order application and the duty of full and frank disclosure. You are not present and not notified when the application is heard.

The order must be served on the taxpayer within seventy-two hours unless the court extends that time. The taxpayer may then apply under subsection 225.2(8) for review by a judge, generally within thirty days of service, on at least six clear days notice to the Deputy Attorney General of Canada. This is a statutory review under section 225.2, not an application for judicial review under the Federal Courts Act, and the difference governs both the procedure and the timeline.

On review the taxpayer carries the initial burden of showing reasonable grounds to doubt that the statutory test was met, after which the onus shifts to the CRA to justify the order. The reviewing judge may confirm, set aside or vary it, and under subsection 225.2(13) that decision is final. The jeopardy order remains in force and the CRA may continue collecting while the review is pending.

The Collections Limitation Period

Before 2004 the Income Tax Act contained no limitation period for collections. In Markevich v. Canada, 2003 SCC 9, the Supreme Court of Canada held that the CRA’s statutory collection procedures were nonetheless caught by a limitation period, and that a debt assessed in 1986 and left alone until 1998 was no longer collectible. Parliament responded by legislating a collections limitation period into section 222.

The period is ten years for most income tax and GST/HST debts and six years for certain others, running from the date the limitation period starts for that debt type. The practical point is not the length but the restart: a wide range of events resets the clock to zero, including a written acknowledgment of the debt, a proposed payment arrangement, a payment, a garnishment or set-off, certification in Federal Court, and the CRA accepting security. A taxpayer who telephones the CRA to ask for more time has, in all likelihood, just restarted a ten-year clock.

Expiry of the period does not extinguish the debt. It bars most collection action, but the amount remains owing and voluntary payments can still be made. The mechanics of the restart rules are set out in our article on the CRA collections limitation period.

Derivative Liability: Section 160

Section 160 of the Income Tax Act, and its GST/HST counterpart in section 325 of the Excise Tax Act, allow the CRA to collect one person’s tax debt from somebody else. Where a tax debtor transfers property to a spouse or common-law partner, to a person under eighteen, or to any person with whom the transferor was not dealing at arm’s length, and the consideration given is less than fair market value, the transferee becomes jointly and severally liable for the transferor’s tax debt up to the shortfall.

The Federal Court of Appeal in Canada v. Livingston, 2008 FCA 89 set out the four-part test applied ever since: the transferor must be liable to pay tax at the time of the transfer, there must be a transfer of property by any means whatever, the transferee must be a non-arm’s-length party within the listed categories, and the consideration must be less than the fair market value of the property transferred. Livingston also held that depositing funds into another person’s bank account is itself a transfer of property, and that a transfer occurs even where beneficial ownership does not change hands.

Section 160 is unforgiving. There is no due diligence defence, it applies whether or not the transfer was motivated by tax avoidance, it catches transferees who had no knowledge of the transferor’s tax position, and it contains no limitation period of its own. Routine family transactions, including putting a spouse on title or moving money between household accounts, are assessed under it years after the fact. The provision was expanded by a supplementary rule in Budget 2025, which closes asset-stripping arrangements that previously fell outside it. Where the transfer is into a trust, the liability attaches differently, a point explored in our analysis of derivative tax liability for trusts and trustees.

Directors’ Liability

Where a corporation fails to deduct, withhold or remit amounts held in trust, section 227.1 of the Income Tax Act and section 323 of the Excise Tax Act make the directors jointly and severally liable with the corporation, together with related penalties and interest. The CRA must first be unable to collect from the corporation, and the assessment must be made within two years of the individual ceasing to be a director.

The due diligence defence is the live battleground. In Buckingham v. Canada, 2011 FCA 142, the Federal Court of Appeal held that the standard under subsection 227.1(3) and subsection 323(3) is an objective one, adopting the reasonable prudent person standard from Peoples Department Stores and displacing the more forgiving objective subjective approach from Soper. A director’s personal background and experience are considered as part of the circumstances but are not the measure. Critically, Buckingham held that the defence is directed at preventing failures to remit rather than curing them, so a director who allows the corporation to fund operations with trust money in the expectation of catching up later will not succeed. The Court also confirmed that directors’ liability is not absolute.

Security Instead of Payment

IC98-1R8 added a framework for security that its predecessors did not contain. The CRA may accept security in addition to or instead of payment, and in some circumstances legislation requires it. The circular identifies bank letters of guarantee, standby letters of credit and mortgages as types the CRA may accept, says that letters should come from a Schedule I or Schedule II financial institution as defined in the Bank Act, and states that other forms are assessed case by case under the discretion in subsection 220(4). Acceptable security must be liquid, equivalent or near equivalent to cash, and realizable on demand without defence or claim from third parties.

This matters in two situations in particular. Where the Tax Court of Canada or the Canadian International Trade Tribunal dismisses an appeal and a further appeal is taken, the CRA will demand immediate payment of the full amount but will accept security in its place. And a large corporation that cannot pay the enforceable balance may provide acceptable security for half of the assessed amount instead, provided it is disputing the assessment and the security or payment arrangement is acceptable to the CRA.

Repayment of Disputed Amounts

A taxpayer who has paid an amount in dispute, or provided security for it, can apply in writing to have it returned. If the Appeals Division has not confirmed or varied an income tax assessment within one hundred and twenty days of service of a notice of objection, the amount paid or security provided may be returned or released. The same applies where the assessment has been appealed to the Tax Court of Canada.

The entitlement is halved for a large corporation and for tax owing from a tax shelter donation. And it does not apply at all where the CRA determines that collection would be at risk if the amount were repaid, in which case it will ask the court to let it keep the funds, nor to amounts or security provided by non-residents in respect of certain taxable Canadian property and Canadian resource property dispositions, nor to debts that are not subject to collection restrictions in the first place.

Collecting Across Borders

Leaving Canada does not resolve a tax debt. Where Canada has a tax treaty containing a bilateral assistance in collection provision, the CRA can ask the treaty partner to recover the debt. It also works the other way: the treaty partner can assist the CRA in reaching assets held abroad by a taxpayer who still resides in Canada, and the CRA will in turn collect in Canada on a partner’s behalf. Our article on whether the CRA can collect tax on your foreign assets sets out how this works under the Canada US tax treaty.

“The taxpayers who come out of a CRA collections file in the best shape are almost never the ones with the strongest legal argument. They are the ones who picked up the phone early, before a certificate was registered and before a lien went on the house. By the time a bank account is frozen, the question has shifted from what the CRA is entitled to do to how quickly we can get it undone, and that is a much harder and more expensive conversation.”
David J. Rotfleisch, founding tax lawyer, Rotfleisch & Samulovitch Professional Corporation

Practical Implications for Canadian Taxpayers

The first implication is that silence is the most expensive strategy available. Every protection described above is time-bound, and most of them are forfeited by inaction rather than by any adverse decision. The objection deadline, the thirty-day jeopardy review window and the two-year directors’ liability assessment period all run whether or not the taxpayer is paying attention.

The second is that a collections file and a tax dispute file have to be run together. Filing a notice of objection is simultaneously the way to challenge the assessment and, for most income tax amounts, the way to suspend collection. Taxpayers who negotiate a payment arrangement without first considering whether the assessment is correct have often agreed to pay an amount that could have been reduced.

The third is that the composition of the debt drives everything. A taxpayer with a balance made up of personal income tax has meaningful protection. The same taxpayer, as a director of a corporation behind on source deductions and GST/HST, has essentially none, faces immediate collection, and is exposed personally under section 227.1 and section 323. Those two conversations look nothing alike and should not be managed the same way.

The fourth is that family and business transactions during a period of tax debt carry consequences that surface much later. Section 160 has no limitation period and no due diligence defence. Transfers that seemed unremarkable at the time are assessed years afterward, often against a spouse or adult child who knew nothing about the debt.

The fifth is realism about outcomes. The CRA does not settle an underlying tax debt for less than the full amount in the way a private creditor sometimes will. What is genuinely available is a payment arrangement matched to ability to pay, relief from interest and penalties under the taxpayer relief provisions, reduction of the debt itself through a successful objection or appeal, and in the right circumstances an insolvency proceeding. Where the debt arises from income that was never reported, the voluntary disclosures program may be the better entry point before collections escalates. Interest and penalty relief under subsection 220(3.1) is limited to the ten calendar years preceding the year the application is made, a limit confirmed in Bozzer v. Canada, 2011 FCA 186 to run from the year of the application rather than the year the debt arose; our analysis of the Bozzer decision sets out the reasoning in full. Where the debt cannot realistically be paid, bankruptcy and consumer proposals are the remaining route.

Takeaway: Responding to CRA Collections Action

A CRA collections officer can freeze a bank account, garnish wages, intercept receivables, register a certificate that functions as a court judgment, lien a home and direct a sheriff to seize and sell property, in most cases without notice and without ever appearing before a judge. Those powers are real, and the intimidation that accompanies them is a deliberate part of how the process works.

They are also constrained. The ninety-day restriction in section 225.1 is statutory. A notice of objection suspends collection of most income tax amounts. A jeopardy order can be reviewed and set aside. The collections limitation period eventually bars most enforcement. Derivative and directors’ liability assessments can be contested, and Buckingham confirms that directors are not absolutely liable.

What determines which of those protections remain available is almost always timing. Confirm what is owed by year and by tax type. Preserve the objection deadline. Do not acknowledge a debt or propose a payment plan without understanding that doing so restarts the collections limitation period. And get representation in place before the financial disclosure begins, not after the account is frozen.

Pro Tax Tips: Protecting Yourself During a CRA Collections File

• Confirm the composition of the debt before doing anything else. Pull a statement of account and identify every balance by year and by tax type. Whether the ninety-day restriction applies, whether an objection will suspend collection, and whether you are personally exposed as a director all turn on that breakdown, and a balance that looks like one debt is frequently four.
• Treat the objection deadline as a collections deadline. For most income tax amounts, a notice of objection does double duty: it preserves the dispute and it stops collection. Missing it loses both at once, and the application to extend time is discretionary rather than automatic.
• Understand what restarts the clock before you call the CRA. A written acknowledgment of the debt, a proposed payment arrangement or a single payment will reset the collections limitation period. There are good reasons to engage with collections early, but doing it without understanding the limitation consequences can convert a debt that was approaching expiry into one with another decade to run.
• Keep the trust fund amounts separate in your thinking. Source deductions and GST/HST collected are not your money and never were, and the entire structure of collections restrictions, deemed trusts and directors’ liability follows from that. A business that funds payroll out of unremitted trust money is accumulating personal liability for its directors, and Buckingham forecloses the argument that an intention to catch up later amounts to due diligence.
• Diarize the jeopardy review window the day you are served. Thirty days from service, with at least six clear days notice to the Deputy Attorney General of Canada, and the order stays in force while the review proceeds. This is a statutory review under section 225.2, not an application for judicial review, and treating it as the latter will cost the window.
• Do not transfer property while a tax debt is outstanding without advice. Section 160 has no due diligence defence, no limitation period and no requirement that the transferee know anything about the debt. Adding a spouse to title, moving money between household accounts or paying a family member out of a business account are all assessable transfers.
• Say less than you are asked for, and say it through a representative. The financial disclosure that accompanies a payment arrangement is extensive, and collections officers sometimes ask for more than they are entitled to. A knowledgeable Canadian tax lawyer can establish ability to pay without volunteering the full picture of your financial affairs.

Frequently Asked Questions

Can the CRA take money from my bank account without telling me?

Yes. A requirement to pay issued under subsection 224(1) of the Income Tax Act directs the bank to pay the CRA, and no court order or advance notice to you is required. The first you learn of it is usually a declined transaction or a frozen balance.

Can the CRA garnish my wages without a court order?

Yes. A requirement to pay issued to an employer operates as a wage garnishment under the same provision. Unlike a private creditor, the CRA does not need to sue you first or obtain a judgment.

How long does the CRA have to collect a tax debt?

The collections limitation period in section 222 of the Income Tax Act is ten years for most income tax and GST/HST debts and six years for certain others. The period restarts on a payment, a written acknowledgment of the debt, a proposed payment arrangement, a garnishment or set-off, certification in Federal Court, or the CRA accepting security.

Does filing a notice of objection stop CRA collections?

For most income tax amounts, yes. Section 225.1 bars collection while an objection or a Tax Court appeal is outstanding. It does not stop collection of GST/HST, source deductions or other trust fund amounts, and it does not stop set-off of refunds and credits.

Can the CRA collect GST/HST while I am disputing it?

Yes. The Excise Tax Act contains no collections restrictions, so an objection or appeal does not suspend collection of a GST/HST debt. This is the single most commonly misunderstood point in Canadian tax collections.

What is the ninety-day rule?

Section 225.1 of the Income Tax Act prevents the CRA from starting court proceedings, certifying the debt in Federal Court, issuing a requirement to pay or making a direction under subsection 225(1) until ninety days after a notice of assessment or reassessment is sent. It is a statutory prohibition, subject to the exceptions for trust funds, large corporations, jeopardy orders and the other carve-outs listed in the circular.

Can the CRA seize my RRSP?

Not directly. Because a registered retirement savings plan is a trust, the trustee is not liable to pay the annuitant until the annuitant requests the funds, so a requirement to pay has nothing to attach to. The CRA can freeze the plan so that no deposits or withdrawals occur, and payments flowing out of a registered retirement income fund can be captured.

Can the CRA put a lien on my house?

Yes, once it has registered a certificate in the Federal Court under section 223. The lien secures the debt against the property much as a mortgage does, and the CRA will usually not discharge it until the balance is paid in full, even where a payment arrangement is in place.

What is a jeopardy order?

An authorization obtained from a judge under subsection 225.2(2) on an ex parte basis, without notice to the taxpayer, allowing the CRA to collect immediately despite the collections restrictions. It must be served within seventy-two hours, and the taxpayer may apply under subsection 225.2(8) for review by a judge, generally within thirty days of service.

Can my spouse be assessed for my tax debt?

Yes, under section 160 of the Income Tax Act or section 325 of the Excise Tax Act, where property was transferred for less than fair market value while the tax debt existed. There is no due diligence defence and no limitation period, and liability is capped at the difference between the value of the property and any consideration given.

Am I personally liable for my corporation’s unremitted source deductions?

As a director, potentially yes, under section 227.1 of the Income Tax Act and section 323 of the Excise Tax Act. The CRA must first be unable to collect from the corporation, and the assessment must be made within two years of your ceasing to be a director. A due diligence defence is available but is assessed on the objective standard set in Buckingham v. Canada, 2011 FCA 142.

Will the CRA accept less than the full amount I owe?

Not as a settlement of the underlying tax. What is available is a payment arrangement based on ability to pay, interest and penalty relief under the taxpayer relief provisions, reduction of the assessment itself through an objection or appeal, and insolvency proceedings in the right circumstances.

Can the CRA take my tax refund or GST credit if I am disputing the debt?

Yes. Set-off is one of the few collection actions that is expressly available even where the amount is under objection or appeal, and it covers refunds, goods and services tax and harmonized sales tax credits and benefit payments.

Can the CRA collect from me if I move out of Canada?

Yes, where Canada has a tax treaty with a bilateral assistance in collection provision, the CRA can ask that country to recover the debt. The arrangement also allows a treaty partner to assist the CRA in reaching assets held abroad by a taxpayer who still resides in Canada.

Can I get a tax lien removed once I start making payments?

Usually not. The CRA’s position is that a lien registered after certification stays in place until the balance is paid in full, and a payment arrangement does not by itself trigger discharge. This is one of the practical reasons to resolve a collections file before certification rather than after.

What should I do first if a CRA collections officer contacts me?

Confirm what is owed by year and by tax type, check whether any objection deadline is still open, and get representation in place before providing financial disclosure. You are entitled under the Taxpayer Bill of Rights to be represented by a person of your choice, and once a Canadian tax litigation lawyer is retained the CRA will deal with your representative rather than with you.

DISCLAIMER: This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out-of-date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.