CRA Collections in Ontario: What You Need to Know

Key Takeaways

• CRA Has Strong Enforcement Powers: Unlike other creditors, CRA doesn’t need a court order to garnish wages, freeze bank accounts, or place liens on property, making it a more aggressive collector.

• Debt Types Collected by CRA: CRA can collect personal income taxes, GST/HST, CERB overpayments, and payroll deductions, with debt growing quickly due to penalties and interest.

• Options for Dealing with CRA Debt: You can negotiate repayment plans directly with CRA, apply for taxpayer relief, or file a consumer proposal to reduce your debt and stop collection actions.

• Licensed Insolvency Trustees Offer Key Help: Only a Licensed Insolvency Trustee (LIT) can file a consumer proposal, which can reduce CRA debt, stop garnishments, and offer manageable payments.

Why CRA Debt Is Different from Other Debt

Owing money to the Canada Revenue Agency (CRA) is one of the most stressful types of debt a Canadian can face. Especially in Ontario, where CRA has powerful legal tools at its disposal. Unlike banks or credit card companies, the CRA doesn’t need a court order to garnish your wages, freeze your bank account, or place a lien on your property.

If you’ve received a collections notice from the CRA, you’re not alone. Many Ontarians, especially self-employed workers, gig economy earners, or those affected by pandemic-related income support repayments find themselves behind on taxes, GST/HST, or even CERB.

The good news is that there are Ontario debt relief programs that can help. Understanding how CRA collections work is the first step toward protecting your income and moving forward.

What Is the CRA and What Types of Debts Can They Collect?

The CRA is the federal body responsible for administering tax laws and collecting money owed to the government. In Ontario and throughout Canada, the CRA can collect a variety of debts, including:

• Personal income taxes

• Goods and Services Tax (GST) or Harmonized Sales Tax (HST)

• Canada Emergency Response Benefit (CERB) or other pandemic benefits that were overpaid

• Payroll source deductions (CPP, EI, income tax withheld from employees)

  
  

What makes CRA debt so difficult is how quickly it grows with interest and penalties. If you delay addressing it, even a modest tax debt can balloon out of control. You can find out more about CRA debt collections here.

How CRA Collections Work in Ontario

No Court Order Required for Wage Garnishment

Unlike private creditors, CRA doesn’t need to sue you in court to garnish your wages. It can send a Requirement to Pay (RTP) directly to your employer, instructing them to deduct money from your wages and send it to the government. This can happen without warning.

In Ontario, CRA can legally garnish:

• Up to 50% of your wages

• 100% if you're self-employed or contract-based

• Any commissions, bonuses, or other income reported by your employer

Bank Account Freezes and Liens on Property

CRA can also send an RTP to your bank, which will freeze your account and send funds directly to the government. Additionally, the CRA can register a lien against your home or other property affecting your ability to sell or refinance until the debt is cleared.

Collection Letters, Phone Calls, and Legal Notices

CRA will usually begin with letters or phone calls. But if you don’t respond or resolve the debt, collection actions escalate quickly. Unlike most creditors, they have fewer procedural hurdles and more enforcement power.

Your Rights When Dealing With CRA Collections

You’re Entitled to Know What You Owe

Before taking any action, CRA must provide you with:

• A Notice of Assessment

• A breakdown of the debt amount, including interest and penalties

You have a right to verify this information, and you can request clarification if something doesn’t add up.

Requesting a Review or Formal Appeal

If you believe the amount is incorrect, you may file an objection or appeal. This doesn’t automatically stop collections, but it’s a step toward correcting the issue. Legal deadlines apply, so don’t delay.

Why Ignoring CRA Letters Makes Things Worse

One of the most common mistakes people make is ignoring CRA correspondence. Unfortunately, inaction allows the CRA to proceed with collections and you could wake up to find your paycheque or bank account seized.

Options for Dealing With CRA Debt in Ontario

You’re not without options. Even if CRA is calling or garnishing your wages, it’s possible to regain control.

Repayment Arrangements Directly With the CRA

CRA may offer monthly payment plans, but they’re often rigid and based on what you owe, not what you can afford. Miss one payment, and you may be back in collections.

Taxpayer Relief Provisions

If your debt arose due to serious illness, job loss, or other hardship, you may apply for taxpayer relief. This can reduce interest and penalties, but rarely eliminates the principal amount owed.

Filing a Consumer Proposal Through a Licensed Insolvency Trustee

A consumer proposal is a legal debt solution filed by a Licensed Insolvency Trustee (LIT). It:

• Consolidates your debts (including CRA debt)

• Allows you to repay a portion based on what you can afford

• Stops all collections, wage garnishments, and legal actions

• Freezes interest and penalties

• Stops debt collection calls

  
  

Importantly, CRA does accept consumer proposals, as long as the offer is fair and properly structured by a Licensed Insolvency Trustee.

Ontario Debt Relief Programs That Apply to CRA Debt

This is where the target keyword comes in: if you’re searching for an Ontario debt relief program, a consumer proposal is the most effective formal solution for CRA debt and other debts like student loans, credit card debt, payday loan, etc.

Consumer Proposal: The Only Legal Way to Reduce CRA Debt

Only a consumer proposal can:

• Legally reduce the amount you owe to CRA

• Protect your wages and assets without bankruptcy

• Offer fixed monthly payments over a maximum of five years

  
  

This program is administered only by a Licensed Insolvency Trustee—not a credit counsellor or debt consultant. This is not a debt management plan.

Bankruptcy as a Last Resort

In extreme cases, where you have little or no income and no ability to repay, bankruptcy can discharge CRA debt. But it has more serious consequences for your credit and credit rating, which may involve the loss of certain assets. It’s not the first option, but it is a valid last resort.

Real-World Example: Michael’s Story

Michael, a 47-year-old self-employed contractor in Hamilton, owed over $45,000 to CRA for unpaid income tax and HST. When business slowed during the pandemic, he fell behind.

He received a Requirement to Pay letter, and his bank account was frozen right after depositing a cheque for a major job.

Michael turned to a Licensed Insolvency Trustee, who helped him file a consumer proposal:

• $45,000 in CRA and credit card debt

• Settled for $21,000 over five years

• No more wage garnishments

• Kept his work truck and client relationships intact

  
  

Why Speak to a Licensed Insolvency Trustee Early

CRA Can Move Quickly—You Need to Be Proactive

Unlike private creditors, the CRA doesn’t wait for a court process. Once the debt is overdue, they can and will act. The sooner you speak to a trustee, the more options you’ll have.

Trustees Are Legally Authorized to Negotiate With CRA

Only Licensed Insolvency Trustees can file consumer proposals and bankruptcies. They have experience dealing with CRA and can help present a proposal that meets the agency’s requirements, while protecting your interests.

Final Thoughts: Don’t Wait Until It’s Too Late

CRA collections are serious, but that doesn’t mean you’re powerless. The right Ontario debt relief program can stop collection actions, reduce your debt, and give you a clear path forward.

If you’re facing CRA collections in Ontario, now is the time to act. Book a free, confidential consultation with a Licensed Insolvency Trustee at the Litvack Group. We’ll explain your options, speak to CRA on your behalf, and help you build a plan that works for your life and stop harassing debt collection calls.