CRA Froze My Bank Account: What a Requirement to Pay Means and What You Can Do

A requirement to pay (RTP) is the CRA's version of a garnishment. It is issued under section 224 of the Income Tax Act, and similar rules apply to GST/HST debts under the Excise Tax Act. The CRA sends it to a third party that owes you money or holds money for you, such as a bank, an employer, a client or a tenant. The RTP directs that third party to send some or all of the money to the CRA instead.

Unlike a private creditor, the CRA does not need a court order to issue an RTP. It can cover income tax, corporate tax, payroll deductions and GST/HST. If you have an outstanding debt and the CRA could not collect it by agreement, an RTP is one of the tools it can use. It can also reach the proceeds of a sale, such as the proceeds from selling a house, if an RTP is in effect when the money becomes payable.

People often call this "a bank freeze". Collection letters and calls often come first, but the law does not require a court order before an RTP is served.

According to the CRA, a requirement to pay is generally valid for 90 days, one year, or until the debt is paid in full, with some exceptions. An RTP on wages is different. Once it is issued, it generally applies to every later periodic payment, such as your salary, until the debt is paid or the CRA withdraws it in writing. When the garnishment is ending, the CRA's written withdrawal comes with a contact number.

A third party that does not comply can itself become liable for the amount, so banks and employers generally follow an RTP quickly.

The CRA's powers have limits. They depend on the type of debt and whether you have disputed it:

• Disputed income tax. In general, when you file a valid notice of objection or appeal to the Tax Court, the CRA is restricted from collecting the disputed amount for a period while the dispute is pending. There are exceptions, so confirm how this applies to your file.
• GST/HST and payroll amounts. Different rules apply. The restrictions for income tax do not work the same way for these debts, so do not assume an objection stops collection.
• Jeopardy. Where the CRA believes collection may be put at risk, it can apply to the Federal Court for authority to collect immediately.
• Undisputed debts. Once an amount is not in dispute, the CRA can collect it.

1. Read the requirement. Note the date, the amount, which debt it relates to and the CRA contact number.
2. Find out what the debt is. Look at your notices of assessment and reassessment. If the amount is wrong, or if you never received a notice, find out your deadlines for an objection or appeal. See what to do if you receive a CRA reassessment.
3. Call the CRA collections officer. The CRA often prefers to reach a payment arrangement. Explain your situation and ask what it needs, such as financial statements and a payment plan.
4. Ask about hardship. If the garnishment leaves you unable to pay for necessities or payroll, ask the CRA to release some funds. The CRA decides, so provide documents.
5. Look at relief. The CRA can cancel or waive interest and penalties in some cases. See taxpayer relief provisions.
6. Consider your options if you cannot pay. A licensed insolvency trustee can explain a consumer proposal or bankruptcy. Some CRA claims, such as unremitted payroll deductions, are treated differently from ordinary debts.
7. Do not move money to avoid the CRA. Transfers for less than fair value can lead to further liability for the person who receives the money.

• Reviewing whether the amount was properly assessed and whether you still have time to object or appeal.
• Negotiating with the CRA collections officer for a payment arrangement or the release of funds.
• Requesting taxpayer relief for interest and penalties.
• Responding if the CRA threatens or starts jeopardy collection.
• Working with your accountant or a licensed insolvency trustee when insolvency options need to be compared.

See our page on tax debt and CRA collections and our article on tax debt negotiation in Toronto.