CRA has some of the broadest collection powers of any creditor in Canada. Unlike a bank or credit card company, CRA does not need to take you to court before garnishing your wages, seizing your bank account, or placing a lien on your property. The longer you wait to deal with a tax debt, the more aggressive the collection actions become.
Here is the full timeline of what happens, what CRA can and cannot do, and how to get the situation under control.
CRA enforcement timeline
| Stage | Timeframe After Filing Deadline | What Happens |
|---|---|---|
| Interest starts | Day 1 (May 1 for most individuals) | Compound daily interest begins accruing on the unpaid balance |
| Notice of Assessment | 2-8 weeks after filing | CRA confirms the balance owing |
| First collection letter | 30-60 days after NOA | Formal reminder to pay with a deadline |
| Phone calls begin | 60-120 days | CRA collections agents call to request payment or arrange a plan |
| Demand letter | 90-180 days | Formal demand with escalation warning |
| Collection review | 120-180 days | CRA reviews your assets and income sources |
| Requirement to Pay (RTP) | 6-12+ months | Garnishment of wages, bank accounts, or accounts receivable |
| Property lien | 6-18+ months | CRA registers a lien against real property |
| Legal action | 12+ months (rare) | Court order for property seizure in extreme cases |
Important: These timelines are approximate. CRA may accelerate collection if they believe you are dissipating assets, leaving the country, or deliberately avoiding payment.
How CRA interest compounds
CRA interest is compounded daily at the prescribed rate (set quarterly). The current rate has been in the 8-10% range.
Worked example: $15,000 tax debt left unpaid
| Time Elapsed | Balance (at 9% compound daily) | Interest Accrued |
|---|---|---|
| Filing deadline | $15,000 | $0 |
| 3 months | $15,341 | $341 |
| 6 months | $15,690 | $690 |
| 1 year | $16,413 | $1,413 |
| 2 years | $17,957 | $2,957 |
| 3 years | $19,645 | $4,645 |
| 5 years | $23,520 | $8,520 |
After 5 years, the original $15,000 debt has grown to over $23,500 — a 57% increase from interest alone. This is why acting quickly matters.
CRA collection tools
Requirement to Pay (RTP) — wage and bank garnishment
CRA’s most common enforcement tool. No court order needed.
| Target | What CRA Can Take |
|---|---|
| Employer | Up to 50% of net wages per pay period |
| Bank | 100% of the account balance at the time of the RTP (account is frozen) |
| Clients/customers (self-employed) | 100% of amounts owing to you |
| Investment accounts | Non-registered accounts can be seized; registered accounts (RRSP, TFSA) are generally protected unless CRA obtains a court order |
How it works: CRA sends the RTP directly to your employer or bank. They are legally required to comply. You typically receive a copy of the RTP by mail, but the garnishment may already be in effect before your copy arrives.
Set-off of government payments
CRA automatically applies any government payments you are entitled to against your tax debt:
- Income tax refunds
- GST/HST credit
- Canada Child Benefit (CCB)
- Climate Action Incentive
- Canada Workers Benefit
- Provincial credits administered by CRA
This happens automatically without warning — if you owe CRA and are expecting a refund, the refund will be applied to the debt.
Property liens
CRA can register a memorial or certificate against your real property. This:
- Appears on a title search, preventing sale or refinancing without paying the debt
- Remains until the full debt (including interest) is paid
- Takes priority over most other creditors registered after the lien
- Does not expire — CRA does not have a limitation period for tax debts in most provinces
Passport and travel restrictions
CRA can request that the Passport Office deny or revoke your passport if you owe more than $100,000 and CRA has obtained a jeopardy order. This is rare and reserved for cases where CRA believes you intend to leave Canada to avoid payment.
How to set up a payment arrangement
- File all outstanding tax returns. CRA will not negotiate a payment plan if you have unfiled returns.
- Call CRA collections: 1-888-863-8662 (individual accounts).
- Provide your financial information: Income, monthly expenses, assets, and other debts.
- Propose a payment schedule: Be realistic — CRA will counter if your proposal is too low or too long.
- Make payments on the agreed schedule. If you miss a payment, CRA may cancel the arrangement and resume collection.
Key point: Interest continues to compound during the payment arrangement. The arrangement prevents escalation to garnishment and liens, but it does not reduce or freeze the interest.
Taxpayer relief (RC4288)
If you have been penalized and charged interest due to extraordinary circumstances, you can apply for relief under the Taxpayer Relief Provisions (formerly called Fairness Provisions). If cash flow is the immediate issue, start with cant pay taxes in Canada and how to set up a CRA payment plan while relief is being reviewed.
| Situation | Potential Relief |
|---|---|
| Extraordinary circumstances (natural disaster, serious illness, death in family) | Penalties and interest may be waived for the affected period |
| CRA delay or error | Penalties and interest caused by CRA processing errors can be cancelled |
| Financial hardship | CRA may accept reduced payments or extended timelines, but rarely cancels tax debt itself |
| Inability to pay due to circumstances beyond your control | Interest relief for the period of hardship |
File Form RC4288 with supporting documentation (medical records, employer letters, financial statements). CRA reviews within 6-12 months. Decisions can be appealed to the Federal Court if denied.
When to consider professional help
| Situation | Who to Contact |
|---|---|
| Tax debt under $10,000 | Handle directly with CRA — call, arrange payments |
| Tax debt $10,000 – $50,000 | Consider a tax professional or accountant to negotiate and apply for relief |
| Tax debt over $50,000 | Engage a tax lawyer or licensed insolvency trustee |
| RTP already issued | Act immediately — contact a tax professional the same day |
| Considering bankruptcy or consumer proposal | Licensed insolvency trustee (tax debts can be included in bankruptcy and consumer proposals) |
Important: Tax debts are not dischargeable in bankruptcy if they arise from fraud or deliberate tax evasion. However, legitimately assessed taxes — even large amounts from reassessments — can generally be included in a bankruptcy or consumer proposal.
Priority actions if you owe CRA
- File all returns. Even if you cannot pay, filing stops the late-filing penalty (5% + 1% per month) from accumulating.
- Call CRA immediately. Proactive contact signals cooperation and delays aggressive collection.
- Pay what you can now. Even a partial payment reduces the balance that compounds daily.
- Set up a payment arrangement. A formal plan prevents garnishment and liens while you pay down the debt.
- Apply for taxpayer relief if extraordinary circumstances contributed to the debt.
- Do not ignore CRA letters. Escalation from letter to garnishment happens faster when CRA cannot reach you.
Related pages
- Cannot Pay Taxes in Canada — all your options
- How to Set Up CRA Payment Plan — step-by-step guide
- CRA Voluntary Disclosure Guide — fixing past errors
- What Happens If You Don’t File Taxes Canada — late-filing penalties
- Tax Deadline Canada — key dates to know