Can CRA Seize Your Bank Account or Garnish Your Wages in Canada?

Unpaid tax can feel like a countdown, especially when you hear that the CRA can go straight to your bank or your employer. The real picture has more steps and more limits than the stories suggest.

This article explains the legal tool the CRA uses, when it is generally held back, and what you can do to reduce the risk. It is general information, and your own situation should be confirmed with a lawyer or accountant.

This article covers Canadian federal tax law, which applies in every province.

The tool: a requirement to pay

The usual route is a written requirement to pay under section 224(1) of the Income Tax Act. The Minister may require a person who owes or will within one year owe money to a tax debtor, such as an employer or a bank, to pay it to the Receiver General.

For recurring payments such as wages, the requirement applies to all payments until the debt is satisfied. In practice this means one notice to your employer can redirect pay cheque after pay cheque, not just a single payment.

I cannot give you a percentage cap on how much of your wages can be taken, because that depends on the facts and on CRA collections guidance, so confirm it with a lawyer or accountant rather than relying on a rule of thumb.

What it means for banks and employers

A third party that fails to comply with a requirement becomes liable to pay the Crown the amount it was required to pay. That is why banks and employers generally comply promptly.

Payment under the requirement discharges the third party's debt to you to that extent. A financial institution's loans or advances to you made within 90 days may also be caught.

• Employer: wages owed to you are the usual target, and recurring payments stay caught until the debt is satisfied.
• Bank: money the bank owes you, such as a deposit balance, is the kind of debt a requirement can reach.
• Others: anyone who owes or will within one year owe you money, such as a customer, can in principle receive a requirement.

When the CRA is held back

Section 225.1 limits collection. For most assessments, the CRA may not start court proceedings, certify the debt or take the listed collection steps until 90 days after the notice of assessment was sent.

If you file a notice of objection, collection of the disputed amount is barred until 90 days after notice of the Minister's confirmation or variation. If you file an appeal, it is barred until the Tax Court's decision is mailed or the appeal is discontinued.

There are exceptions. The restrictions do not apply to amounts required to be withheld and remitted, such as payroll source deductions, and related penalties and interest. For a large corporation (taxable capital over $10 million), the Minister may collect half of an assessed amount within 90 days.

The Taxpayer Bill of Rights says you can avoid paying personal tax amounts in dispute until an impartial review, but interest still accrues and undisputed amounts must be paid. The Bill of Rights is a set of principles rather than directly enforceable rights.

Ways to reduce the pressure

Interest on unpaid tax runs at the prescribed rate for as long as the amount is outstanding. The rate for 1 October to 31 December 2026 is 7%, and rates are set quarterly.

If you dispute the assessment, an individual (other than a trust) must serve a notice of objection by the later of one year after the filing-due date and 90 days after the notice of assessment was sent.

The CRA may also cancel or waive penalties and interest under its taxpayer relief provisions. Circumstances that may justify relief include extraordinary circumstances beyond your control, such as flood, fire, serious illness or a death in the immediate family, actions of the CRA, and inability to pay or financial hardship. Individuals claiming inability to pay also submit Form RC376 or a written statement of finances.

Interest keeps accruing while a relief request is pending. If relief is granted for inability to pay, interest is cancelled only up to the decision date. A relief decision has no right of objection or appeal, although you can ask for a second administrative review by a different official or apply to the Federal Court for judicial review within 30 days of notice of the decision.

What to do next

• Check the date on your notice of assessment and count 90 days from when it was sent.
• Decide quickly whether you dispute the assessment, and diarize the objection deadline.
• Separate the amounts you dispute from those you do not, since undisputed amounts must be paid.
• Keep every letter, including any notice sent to your employer or bank.
• If you cannot pay, gather proof of your finances and the circumstances before asking for relief.
• Speak with a lawyer or accountant before the CRA acts, not after.

Frequently asked questions