A CRA collections letter is not the start of the process. It is the middle. What happens next, and how fast, depends on one thing most people get wrong: the type of debt you owe, not whether you are an employee or a business owner.
Statutory provisions, CRA administrative policy, prescribed interest rates and Ontario exemption amounts were confirmed against canada.ca and the consolidated Acts on 26 July 2026. All of them change, so verify the current figures before you act.
Key takeaways
- An assessed income tax debt, personal or corporate, gets a 90-day collection restriction under section 225.1 of the Income Tax Act. The CRA cannot garnish, certify the debt or sue until after the collection-commencement day, which in the general case is 90 days after the notice of assessment was sent.
- Unremitted payroll source deductions and unremitted GST/HST get no waiting period at all. For those amounts the notice of assessment or reassessment is itself the written legal warning.
- A CRA legal warning is valid for 180 days, and the CRA can start legal action at any point inside that window even if the balance changes.
- A requirement to pay under section 224(1) needs no court order, and the CRA sends you a copy at the same time it sends one to your bank or your employer.
- The collections limitation period is 10 years on individual and corporate tax, starting the 91st day after the notice is sent, but only 6 years on payroll debt. CPP and OAS amounts have no limitation period at all.
- Filing a notice of objection restarts that clock, and so does asking the CRA about pre-authorized debit payments. The restart list is much wider than making a payment.
What a CRA notice of collection means
A CRA notice of collection is the letter in the mail telling you a balance owing has moved into debt collection at the CRA. It is not a bill for something new. It is the same tax debt from your notice of assessment or reassessment, now worked by a collections officer instead of by the assessment system.
From that point you usually have an assigned collections officer with a direct number. That person has authority to agree a payment arrangement, and the same person has authority to take legal action. That is why the call goes better when you arrive with a monthly figure you can actually sustain rather than an argument.
If you received a letter and are not sure what it is, check your CRA account online. My Account for individuals and My Business Account both show the balance owing, the tax year and the program the debt sits under. Knowing the program matters more than knowing the amount, for the reason set out next.
The fork in CRA collections: your type of debt decides everything
Most articles on this topic split the world into individuals and businesses. The Income Tax Act does not. It splits on the type of debt. An assessed income tax debt gets a runway and a warning. Money you withheld or collected on behalf of someone else gets neither, whether you are a corporation in Ajax or a sole proprietor in Bowmanville.
| Type of debt | Waiting period | Authority |
|---|---|---|
| Assessed income tax, personal or corporate | 90 days from the notice of assessment | Income Tax Act 225.1(1), 225.1(1.1)(c) |
| Income tax withheld at source and not remitted | None | Income Tax Act 225.1(6) |
| CPP contributions withheld and not remitted | None | Canada Pension Plan s.23(2) |
| EI premiums withheld and not remitted | None | Employment Insurance Act s.85(2) |
| GST/HST collected and not remitted | None. Payable forthwith once assessed | Excise Tax Act s.315(2) |
| Large corporation, half the assessed amount | None for that half | Income Tax Act 225.1(7) |
The logic behind the split is that the second group was never your money. Income tax, CPP and EI withheld from an employee's pay, and the HST a customer handed you at the till, are amounts you held for someone else. The GST/HST version is written into the Excise Tax Act as a deemed trust. A salaried employee can land in the no-waiting-period group too, which is why the business-owner framing is the wrong axis.
The 90-day restriction on an assessed income tax debt
Under section 225.1(1) of the Income Tax Act the Minister must not commence proceedings in a court, certify the amount under section 223, or issue a requirement to pay under section 224(1) until after the collection-commencement day. Section 225.1(1.1)(c) sets that day, in the general case, at 90 days after the day the notice of assessment was sent.
Two details are worth getting exactly right. The collection-commencement day is day 90 itself, and because the bar runs until after that day, the first day the CRA may act is the day following. And the restriction protects any taxpayer, not only individuals, so an Oshawa corporation with a Part I income tax balance gets the same 90 days a salaried filer in Pickering does.
The restriction pauses enforcement, not the meter. Interest compounds daily throughout. For the quarter running 1 July to 30 September 2026 the rate charged on overdue income tax, CPP contributions and EI premiums is 7%, and overdue GST/HST carries the same 7%. Rates reset every quarter, so check the quarter before you rely on a number.
Payroll and GST/HST arrears: why the CRA can take legal action right away
For payroll deduction and GST/HST remittance debts the CRA states plainly that the notice of assessment or reassessment is considered the written legal warning for amounts owing. There is no separate warning letter to wait for, because the assessment was it. The CRA says it may begin legal actions right after you are notified of your debt, and on the business side it proceeds once a verbal legal warning is attempted.
The penalty structure on late payroll remittances is steep enough to matter on its own, and it applies to the remittance amount rather than to the profit.
| How late the remittance is | Penalty |
|---|---|
| 1 to 3 days late | 3% |
| 4 or 5 days late | 5% |
| 6 or 7 days late | 7% |
| More than 7 days late, or not remitted at all | 10% |
| A repeat failure in the same calendar year, made knowingly or through gross negligence | 20% |
If your remittance process is the weak point, that is a bookkeeping problem before it is a collections problem, and it is fixable. Our team handles payroll and bookkeeping for owner-managed businesses across Durham Region.
The legal warning, and the 180 days that follow
Before it seizes assets or garnishes income, CRA policy is to give a legal warning: generally at least one attempt at a verbal warning by phone, plus one written legal warning letter.
A legal warning is valid for 180 days. The CRA can start legal action at any time during that period even if the balance changes. To renew a legal warning after the first 180-day period has expired without any legal action taken, the CRA is required to give only one legal warning, either verbal or written. And the legal warning period does not expire while there is ongoing legal action.
So the practical shape is this. On an ordinary income tax debt you get roughly three months of restriction and then a warning before enforcement. On payroll or GST/HST arrears you get a verbal attempt and the assessment you already have.
CRA collections powers: what the CRA can do at each stage
| Stage | Personal or corporate income tax | Payroll or GST/HST arrears |
|---|---|---|
| Notice of assessment issued | Interest compounds daily. No enforcement yet | Interest compounds daily. The amount is payable forthwith and the assessment is the written legal warning |
| Before the collection-commencement day | The CRA can call, write and negotiate, but cannot garnish, certify or sue | The CRA may begin legal action once a verbal legal warning is attempted |
| After the collection-commencement day | Requirement to pay, certificate and lien, set-off against refunds and benefits, seizure of goods | The same collection actions, available from the start |
| While the debt stays unpaid | Directors are not liable for the corporation's own Part I income tax | Directors can be assessed personally for unremitted source deductions and net GST/HST |
| 10 years on | The limitation period may expire, unless it was restarted | The same, unless it was restarted |
Requirement to pay: CRA wage garnishment without a court order
A requirement to pay is a written demand sent to somebody who owes you money, most often your employer or your bank, telling them to pay the CRA instead. For income tax debts it issues under section 224(1), which says the Minister may in writing require the third party to pay. The CRA's own material lists the legal requirement as no court order required. There is one published exception: a court order is required for COVID-19 benefit debts owed by individuals. A requirement to pay for GST/HST issues under the Excise Tax Act rather than section 224(1).
You are not kept in the dark about it. The CRA tells third parties that it sends a copy of the garnishment to the person or business who owes the debt at the same time it sends the garnishment itself. You learn of it simultaneously rather than in advance, though on an income tax debt the legal-warning policy above normally comes first.
How much the CRA can take from your wages
No maximum percentage is published on canada.ca or set in the Income Tax Act. Section 224(3) provides for such amount as is stipulated by the Minister in the requirement, and the CRA says the first page of the garnishment shows the maximum amount to withhold, which may be a fixed amount or a percentage of each payment. If you have seen a figure quoted online for the share of net pay the CRA takes in a wage garnishment, it does not come from the Act and it does not come from canada.ca. Ask for the document and read the first page.
Bank accounts
The same document sent to a bank is what people mean when they say the CRA froze the account. No exempt or protected balance is published anywhere, and the amount collected is capped by the maximum stated on the garnishment. The CRA's published route out is financial hardship: Information Circular IC98-1 says the CRA will usually not stop or withdraw these actions until the account is paid in full, or when it can be shown that the action is causing financial hardship. That is an evidence exercise rather than a phone argument. If a bank account is the immediate problem, the step-by-step version is in our guide to what to do when the CRA freezes your bank account.
Refunds and benefits the CRA can apply to your tax debt
Under section 164(2) the Minister may apply a refund against another liability instead of paying it out. This is set-off, and it runs quietly in the background of every other collection action.
Two program-specific points matter for households. The GST/HST credit was renamed the Canada Groceries and Essentials Benefit in July 2026, and the CRA confirms it will apply those payments to other tax or government debt. The Canada Child Benefit is different: section 164(2.2) carves it out of set-off except to the extent the liability arose from a CCB overpayment, and the CRA states it will not apply CCB payments to other tax or government debt.
One thing that surprises people. Set-off continues while a payment arrangement is running. The CRA's payment arrangements page says that even if you have a payment arrangement and are making payments, it may use some benefits and other credit payments you receive to pay your debt. Budget for that rather than being caught by it.
Liens: when the CRA registers a certificate against your property
Under section 223(2) the Minister may certify an unpaid amount. Under section 223(3), on production to the Federal Court the certificate shall be registered and, once registered, has the same effect as if it were a judgment obtained in the Court against the debtor. There is no trial and no hearing at the registry step. Section 223(5) then allows a memorial to be filed to create a charge or lien on property in a province, through the provincial land registry system.
Two corrections to claims that circulate about the CRA lien. First, a registered lien clouds title and obstructs a sale, transfer or refinance, but it is not an absolute bar: section 223(7) expressly lets the Minister cancel or withdraw the registration as to particular property and postpone the charge or lien. Second, you are not left unaware. Section 225.1(1)(b) bars certification during the 90-day period in the first place, and IC98-1 states that when a debt is certified the CRA will usually notify you of the actions it takes. What you do not have is a right to be heard before registration. Your route to contest the liability itself comes earlier, through the assessment dispute.
Seizure of goods, and the Ontario exemptions that still apply
Physical seizure under section 225 is the rarest of these tools and the most misunderstood. It carries its own notice rule: section 225(1) requires the Minister to give 30 days notice by registered mail of the intention to seize and sell, and the CRA may only proceed if payment is not made within those 30 days. Under sections 225(2) and (4) seized property is held for 10 days, then sold at public auction, and any surplus after the debt and costs is returned to the owner.
Here is the part that gets stated backwards almost everywhere. Section 225(5) says goods and chattels of a person in default that would be exempt from seizure under a writ of execution issued out of a superior court of the province are exempt from seizure under that section. The provincial exemptions survive. In Ontario they are set by O. Reg. 657/05 under the Execution Act, as amended by O. Reg. 393/25.
| Exemption | Current amount |
|---|---|
| Principal residence, where the debtor's equity does not exceed | $12,997 |
| Motor vehicle | $8,578 |
| Tools of the trade, residual tier | $17,362 |
| Tools, debtor engaged solely in the tillage of the soil or farming | $37,820 |
The scope limit matters as much as the rule. All of that governs a direct seizure of goods and movable property under section 225. It does not govern a requirement to pay under section 224 or a lien under section 223, which run on different machinery. Never read it as a general shield that stops the CRA from taking anything.
Director's liability: when a corporate tax debt becomes a personal one
Section 227.1(1) of the Income Tax Act and section 323(1) of the Excise Tax Act make directors jointly and severally, or solidarily, liable with the corporation for unremitted source deductions and unremitted GST/HST net tax, plus the interest and penalties relating to those amounts. Directors are not liable for the corporation's Part I income tax on its profits. This is the mechanism that turns a business number problem into a personal one.
The CRA cannot start there. It must first have pursued the corporation: an execution returned unsatisfied in whole or in part, or a liquidation or dissolution with the claim proved within six months, or a bankruptcy with the claim proved within six months. Under section 227.1(4) no action may be commenced more than two years after the person last ceased to be a director.
The due diligence defence
Section 227.1(3), and section 323(3) of the Excise Tax Act, both provide that a director is not liable where the director exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances. Read the wording closely: the test is about preventing the failure, not about reacting to it. A director who put a remittance process in place, checked that it actually ran and moved the moment it slipped has something real to argue. A director who noticed the arrears only when the assessment arrived usually does not. Document the process while it is working, because that is the evidence you will want later. This is one of the things we build into owner-manager advisory work rather than leaving it to be reconstructed under pressure.
The CRA collections limitation period, and what restarts it
Section 222(4)(b) of the Income Tax Act ends the collections limitation period a set number of years after it begins, and section 222(5) restarts it when the taxpayer acknowledges the debt or the Minister commences a collection action. The CRA publishes the operating detail in plain language, and two things in it surprise almost everyone: the length is not always 10 years, and the start date is not the same as the 90-day collection-commencement day discussed earlier. Those are different provisions measuring different things.
| Type of debt | When it starts | Length |
|---|---|---|
| Individual tax, corporate tax, COVID-19 subsidies for businesses | The 91st day after a notice, notice of assessment or reassessment is sent | 10 years |
| GST/HST remittance debt | The day after a notice of assessment or reassessment is sent | 10 years |
| Payroll debt | The day after a notice of assessment or reassessment is sent | 6 years |
| Customs debt | The 91st day after a notice is sent | 6 years |
| EI overpayment | The day the overpayment happens | 6 years |
| COVID-19 benefits for individuals | The date of the decision or notice of redetermination | 6 years |
| CPP and OAS | No limitation period | None |
Two rows in that table belong on any business owner's radar. Payroll debt runs out in six years rather than 10, so a payroll arrears file and an income tax file of the same age are not at the same point in their lives. And CPP and OAS amounts have no limitation period at all, which means there is no clock to run out on them.
What restarts the clock, including the two nobody expects
The restart list is far wider than making a payment, and this is the part worth reading twice. The CRA publishes these as actions you take that may restart the limitation period.
- Making a voluntary payment.
- Writing a letter to the CRA to propose a payment arrangement.
- Providing a written acknowledgment of debt.
- Offering to provide security instead of paying the amount owed.
- Making a written request for a reassessment.
- Filing a notice of objection.
- Filing an appeal.
- Asking the CRA if you can make pre-authorized debit payments.
Read the last three again. Disputing the assessment by filing a notice of objection restarts the clock. So does asking the CRA whether you can pay by pre-authorized debit. Two of the most reasonable, most encouraged things a taxpayer can do are also two of the things that can hand the CRA another full period. That is not a reason to avoid either one. It is a reason to know what you are trading before you do it.
The CRA restarts the period too, through its own actions: issuing a garnishment or set-off, applying a tax refund or another credit to your debt, issuing a notice of assessment or reassessment against a third party for amounts you owe, certifying your debt in the Federal Court of Canada, and initiating seizure and sale of assets.
Restarting is not the same as extending
A separate list of events pauses the clock instead of resetting it. When the CRA is notified the event has started the period pauses, and when the event is over it resumes where it left off, so reaching the end can take longer than the stated six or 10 years. The CRA's own illustration: an event that extends a six-year period by two years makes it eight years in total. Filing for bankruptcy or making a proposal, becoming a non-resident of Canada after an assessment is issued, and filing a notice of objection or an appeal all appear on the extension list. Note that an objection and an appeal appear on both lists.
What happens when the period ends
The CRA states that once the limitation period ends it usually cannot take any other action to collect, but that your debt remains and you can make voluntary payments, and that voluntary payments made after the period ends should not restart it. There are two published exceptions where a post-expiry step can restart the clock: a voluntary payment on a Canada Student Loan or Canada Apprentice Loan, and an acknowledgement of debt for COVID-19 benefits for individuals. For EI debt the CRA is blunt: do not make any payments after the limitation period expires.
None of which makes waiting a strategy. You cannot reliably calculate the expiry date from your kitchen table, a collection action by the CRA restarts the clock just as your own payment does, and a decade of daily compound interest is a worse outcome than almost any arrangement. Treat the limitation period as something to understand before you make a payment or file a dispute on a very old balance, not as a plan.
How to set up a CRA payment arrangement and pay your debt over time
A CRA payment arrangement is an agreement to pay the tax debt in instalments you can sustain. It is the single most useful move available to a taxpayer who is unable to pay in full, and it works on personal and business accounts alike.
Before you call, work out the amount you can afford using the monthly net income and expense worksheet on canada.ca. Going in with a number you have tested against your own budget changes the conversation, because the officer will review your financial situation either way.
- Set up a pre-authorized debit yourself in My Account, My Business Account or Represent a Client. Note the limit: legal representatives can schedule a pre-authorized debit for individuals, but business representatives cannot.
- Use the automated TeleArrangement service at 1-866-256-1147, Monday to Friday 7 am to 10 pm ET. It handles personal income tax debt only.
- Call an agent on the collections number for your type of debt and agree the terms directly with collections.
| Type of debt | Number |
|---|---|
| Personal income tax | 1-888-863-8657 |
| Corporate income tax | 1-866-291-6346 |
| GST/HST | 1-877-477-5068 |
| Payroll | 1-877-548-6016 |
| Child and family benefit overpayments | 1-888-863-8662 |
Have your social insurance number or your business number in front of you before you dial. Once the arrangement is set up the CRA's terms are explicit: you must continue to make payments on the agreed upon dates, file all future returns on time and stay up to date with your obligations, and the CRA may review your payment arrangement periodically. One honest caution. Canada.ca publishes no maximum length for an arrangement, but the Taxpayers' Ombudsperson has reported that the CRA works to an internal maximum period and a corresponding minimum payment without publishing the parameters, so do not walk in assuming there is no ceiling.
A worked example from Whitby
Say you run an incorporated renovation business in Whitby with two balances. The corporation owes $22,000 of unremitted payroll source deductions from three months in early 2026, and you personally owe $6,500 on your 2025 T1, assessed 12 June 2026. It looks like one problem. It is two, on two different clocks.
- The $6,500 personal balance was assessed 12 June 2026, so the collection-commencement day is 10 September 2026. Until then the CRA can call and write, but it cannot issue a requirement to pay or certify the debt.
- The $22,000 of payroll arrears has no waiting period. The assessment is the written legal warning, and the CRA can move once a verbal warning is attempted. The late-remitting penalty on a remittance more than seven days late adds 10% of the amount on top.
- If the corporation cannot pay and the CRA's collection efforts against it come up short, you can be assessed personally for the payroll arrears and the related interest and penalties under section 227.1. The personal balance never travels the other way.
The order of operations follows from that. Call the payroll line first and get an arrangement on the $22,000, because that is the debt with no runway and the one that can reach your personal assets. Deal with the $6,500 before 10 September, while the restriction is still doing work for you.
If you disagree with the balance, file a notice of objection
Arguing the amount with a collections officer does not work, because that officer collects rather than assesses. If the assessment is wrong, file a notice of objection. Per CRA publication P148, the CRA normally postpones collection on amounts in dispute until 90 days after its decision on the objection, and until the Tax Court's decision on an appeal.
The exceptions are the same debts as before. The CRA will not postpone collection for taxes you had to withhold and remit, or where an amount is in jeopardy. For GST/HST the protection is not automatic either: GST/HST Memorandum 31-0 states the Minister may attempt to collect the full amount even though a person has filed an objection or appeal, with postponement discretionary and posting satisfactory security as a way to constrain collection. The CRA also says it can continue to collect amounts assessed on corporate accounts even if you filed an objection or an appeal to the Tax Court.
One consequence people miss. Filing a notice of objection or an appeal appears on the CRA's list of actions that restart the collections limitation period, and on its list of events that extend it. On an old balance, disputing the assessment can buy the CRA years of additional collection time even if the dispute itself succeeds in part. That is not an argument against objecting when the assessment is wrong. It is an argument for knowing the age of the debt before you file.
If you cannot pay in full: relief, consumer proposal or bankruptcy
Taxpayer relief under section 220(3.1) can cancel or waive penalties and interest, but not properly assessed tax. The CRA lists extraordinary circumstances, actions of the CRA, and inability to pay or financial hardship as situations relief may be granted for. You request it on Form RC4288, with Form RC376 for the financial statement where hardship is the ground. The interest window follows the Federal Court of Appeal decision in Bozzer v. Canada: the Minister may cancel interest that accrued during the 10 calendar years preceding the year of the request, whatever year the debt arose in. There is more detail in our guide to CRA taxpayer relief and voluntary disclosure.
Two timing facts to plan around. The CRA's published service standard is a decision letter within 180 calendar days, met 85% of the time, while its taxpayer relief page currently posts an average processing time of sixteen months. And IC07-1R1 confirms the CRA continues to charge compound daily interest at the prescribed rate on any amount owing while a relief request is under review. So for most people the sensible course is to deal with the balance in parallel rather than treat the request as a reason to wait. If relief is refused, you can ask for a second administrative review by an official not involved in the first decision, and you can seek judicial review in the Federal Court within 30 days.
Where no payment plan with the CRA is realistic, a consumer proposal or bankruptcy filed through a licensed insolvency trustee can include income tax debt. Treat it as a last resort and get proper legal advice first. One rule to know before you file a consumer proposal or go further: under section 172.1 of the Bankruptcy and Insolvency Act, a bankrupt with $200,000 or more of personal income tax debt representing 75% or more of the total unsecured proven claims is not entitled to an automatic discharge, and the trustee must apply to the court for a discharge hearing.
Talk to someone before the CRA calls again
Most of the damage in CRA collections happens in the gap between the notice of assessment and the first call back. If you owe money to the CRA, or your corporation is behind on remittances, the useful next step is a short conversation with someone who can read the assessment, work out which clock you are actually on and build a payment arrangement that survives contact with your cash flow.
EK CPA Pro works with individuals and owner-managed businesses across Durham Region, including Oshawa, Whitby, Ajax, Pickering, Clarington and Uxbridge. See how we handle CRA and tax matters, or book a call and we will look at the file with you.
This article is general information, not tax or legal advice. Statutory provisions, CRA administrative policy, prescribed interest rates and Ontario exemption amounts change. Confirm current figures with the CRA or canada.ca and speak with a CPA about your own situation before you act.
