How the Canada Revenue Agency Collects Tax Debt

If you owe tax money to the Canada Revenue Agency (CRA), you may consider it like any other debt, such credit card debt or a car loan. However, it’s important to know that the CRA has collection powers that are much stronger than many typical creditors.

Dealing with the CRA is always difficult. It is a large and complex government organization and thus you’ll probably find yourself dealing with a lot of bureaucracy and confusing arrangements every time you end up in contact with the CRA. However, the situation can quickly get more serious than simple paperwork. The CRA is able to take steps to collect tax debt that can seriously hurt your financial situation.

If You Don’t Pay Your Taxes

If you cannot or will not pay your tax debt in full and on time, the CRA can and will charge interest compounded daily on any amount owing until the balance is paid in full. The CRA can also charge penalties for filing your taxes late. However, there are also many other actions that the CRA can take if you do not pay your taxes.

  • Wage Garnishment
    • The CRA can issue a garnishment to intercept funds that you receive from a third party. For example, the CRA can seize the money that your employer sends you and then apply this money against your outstanding tax debt. That means you won’t get the money you’ve worked for until your tax debt is paid off. This can obviously be incredibly damaging financially.
  • Certifying your Debt & Freezing your Bank Account
    • The CRA can also certify your debt in a court of law, which makes your debt a matter of public record. This lets the CRA freeze your bank account.
  • Seizing Assets
    • The CRA also has the ability to seize and sell your assets in order to collect the tax money that is owed. This could include your home, your car, and even your business property. In this situation, you will also be required to pay all reasonable costs and charges that the CRA incurs during this process.
  • Withhold Money from other Government Agencies
    • The CRA can also take money that you would have received from other government agencies and apply this money towards paying down your tax debt. For example, the CRA can take your GST/HST credit payment and apply it towards your debt.

As you can see, not only does the CRA have incredible power, but it can seriously harm your financial situation through the process of collecting tax debt. The CRA does not care about other debts or expenses that you may have. It wants the money that is owed and it wants it quickly.

If you are in a situation where you owe tax debt that you are unable to repay quickly, it is a very good first step to contact a professional for assistance. Dealing with the CRA can be tough and you do not want to make an error or omission that causes further damage to your financial situation. To speak to our former CRA employees about your tax debt and find out what you can do to improve your situation with the CRA, please call us at 1-888-868-1400.