The CRA does not need to sue you. It can freeze a bank account, garnish your wages and register against your home using its own paperwork. On income tax you usually have 90 days of breathing room. On HST and payroll, you have none.
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Section 225.1 of the Income Tax Act bars the CRA from collecting on an income tax assessment for 90 days after the notice of assessment is sent. During that window it cannot issue a requirement to pay, certify the debt in Federal Court, or seize anything.
Filing a notice of objection extends the bar. Collection generally stays restricted until 90 days after the CRA confirms or varies the assessment, and if you appeal to the Tax Court of Canada it generally stays restricted until the court decides. That is a real reason to object even where you expect to lose on the merits — it buys time to arrange payment. Large corporations are an exception and must remit a portion of the disputed amount.
None of this applies to unremitted GST/HST or payroll source deductions. Those are trust funds — money you collected or withheld on the Crown's behalf — and the CRA can act the day it assesses. The same goes for amounts you were required to withhold and remit on payments to non-residents.
The requirement to pay is the main tool. It goes to your bank, your employer or your customers and orders them to send your money to the CRA instead of you. No hearing, no court order. Your bank will freeze the account first and ask questions afterwards.
The CRA can also certify the debt in Federal Court, which turns it into a judgment. From there it can register against your real property, seize and sell assets, and offset any refund or benefit payment you were otherwise owed.
It can also go beyond the taxpayer. If you transferred property to a spouse, child or other non-arm's-length person for less than fair value while you owed tax, the recipient can be assessed for the shortfall. And directors can be assessed personally for a corporation's unremitted source deductions and GST/HST, within a limitation period that runs from when they ceased to be a director.
Four routes, usually in combination. Object, if the assessment is wrong — on income tax that restarts the collection bar. Negotiate a payment arrangement, which normally requires full financial disclosure on the CRA's forms. Apply for taxpayer relief to cancel interest and penalties, which does not stop collection but shrinks the balance. Or use insolvency: a consumer proposal or bankruptcy stays CRA collection like any other creditor, with important limits for director and trust-fund liabilities.
Do not ignore a requirement to pay in the hope the debt lapses. There is a limitation period on collecting a tax debt, but it restarts every time you acknowledge the debt, make a payment, or the CRA takes a collection step. That is why old CRA debts rarely die of old age.
If an account is already frozen, speed beats argument. A same-day call with a credible payment proposal and financial disclosure gets a freeze released far more often than a well-drafted letter next week.
Yes. A requirement to pay is served on your bank, not on you. The first you usually know about it is a declined card or a frozen account. The CRA is supposed to have contacted you about the debt beforehand, but that contact may have gone to an old address or sat unread in your CRA online mail.
Collections staff and appeals staff are separate. Filing an objection restricts legal collection action on the income tax portion, but the CRA can still contact you, interest still accrues, and it can still collect on any HST or payroll portion of the same balance. Send the collections officer written proof the objection was filed.
They can register the certified debt against title, which stops you selling or refinancing cleanly. A forced sale of a principal residence is uncommon and generally a last step, but the registration alone is enough to derail a mortgage renewal or a closing. Deal with it before you need the financing, not after.
Say so, with numbers. The CRA can accept an extended payment arrangement based on your disclosed income, assets and expenses, and financial hardship is an accepted ground for cancelling interest under the taxpayer relief provisions. What it does not accept is silence — an unanswered file gets escalated to enforcement more or less automatically.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.