Can’t Pay Your Tax Bill? – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Owing money to the Canada Revenue Agency is stressful, but being unable to pay the balance in full is even more overwhelming. Many taxpayers fear aggressive collection actions, wage garnishments, frozen bank accounts, or liens on property. The good news is that CRA provides several legal mechanisms for taxpayers who cannot pay immediately. Whether you are an individual, self-employed worker, landlord, corporation, or GST/HST registrant, understanding your options can help you avoid penalties, negotiate manageable payments, and protect your financial stability. This guide explains exactly what to do when you cannot pay your tax bill.

Legal and Regulatory Framework

CRA’s authority to collect unpaid taxes comes from the Income Tax Act, the Excise Tax Act, and the Canada Revenue Agency Act. CRA may charge daily interest on unpaid balances, garnish wages, freeze bank accounts, seize refunds, place liens on property, or initiate collections actions. However, CRA also provides structured relief options such as payment arrangements, taxpayer relief, and, in extreme cases, legal insolvency mechanisms. Collections may begin immediately after the assessment or reassessment becomes payable unless a Notice of Objection is filed to dispute the amount.

Key Court Decisions

In Canada v. Simard-Beaudry, the court upheld CRA’s broad powers to collect unpaid taxes, including garnishments and liens. In MNR v. McKinley Transport, the courts confirmed that CRA can seize bank accounts without a court order. In Bozzer v. Canada, the court ruled that CRA can waive interest for periods within the 10-year relief window, even when the underlying tax debt is older. In Kruger Inc. v. Canada, payment arrangements were recognized as valid tools but required strict taxpayer compliance. These cases highlight both CRA’s strong collection authority and the importance of using available taxpayer protections.

Why This Issue Matters

Failure to address unpaid taxes can lead to severe financial consequences such as garnished wages, frozen accounts, asset liens, credit damage, and escalating interest. Acting quickly, communicating with CRA, and securing professional representation dramatically increase your chances of receiving relief or negotiating manageable payments. Ignoring CRA is the worst possible approach.

Options If You Can’t Pay Your Tax Bill

1. Set Up a CRA Payment Arrangement

CRA allows taxpayers to pay in monthly installments when they cannot pay in full. You must demonstrate financial constraints and provide an income and expense statement. CRA will expect you to pay as much as reasonably possible each month.

2. File a Notice of Objection (If the Amount Is Wrong)

If you disagree with your assessment or reassessment, filing a Notice of Objection pauses collection on the disputed amount. This gives you time to resolve the issue without paying first.

3. Apply for Taxpayer Relief

If your inability to pay was caused by illness, financial hardship, CRA delay, or extraordinary circumstances, you may request cancellation of penalties and partial interest, reducing the overall amount owed.

4. Consider a Consumer Proposal or Bankruptcy (Last Resort)

For extreme situations, insolvency under the Bankruptcy and Insolvency Act can eliminate income tax debts. Consumer proposals allow partial repayment while stopping collections and interest. Bankruptcy eliminates most tax debts except certain penalties. These steps require caution and professional guidance.

5. Negotiate Voluntary GST/HST or Payroll Catch-Up

If you owe GST/HST or payroll deductions, CRA is even more aggressive. We can negotiate structured payments while preventing garnishments or escalating enforcement.

6. Request a Temporary Collection Hold

CRA may pause collections if you are preparing documents, filing missing returns, or undergoing an objection or audit.

7. Seek CPA Representation to Prevent Enforcement

A CPA intermediary protects you from unnecessary disclosures, ensures CRA follows proper rules, and negotiates realistic payment schedules.

Mackisen Strategy

At Mackisen CPA Montreal, we help clients facing tax debt by analyzing their financial situation, determining whether the assessment is accurate, filing objections if necessary, negotiating CRA payment arrangements, preparing taxpayer relief applications, reconstructing missing returns, defending against collection actions, coordinating with insolvency trustees when appropriate, and communicating directly with CRA collections officers. Our structured approach prevents aggressive enforcement and restores financial stability.

Real Client Experience

A Montreal client receiving wage garnishments regained control after we negotiated a payment arrangement and filed taxpayer relief for penalties. A business owner facing a frozen bank account had collections lifted once we proved temporary hardship and filed missing GST/HST returns. A contractor owing multiple years of tax avoided bankruptcy through a structured repayment plan. A family facing severe medical hardship had most penalties waived through relief provisions.

Common Questions

Does CRA negotiate? Yes, but only if you disclose accurate financial information. Will interest stop? No—unless Taxpayer Relief is granted. Can CRA seize my home? They can place a lien, but forced sale is rare and follows strict procedures. Does filing bankruptcy erase tax debt? Often yes, except for certain penalties.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps taxpayers regain control when they cannot pay their tax bills. Whether you need a payment plan, an objection, relief, or insolvency guidance, we ensure protection, negotiation support, and complete financial clarity.