CRA Collections: What to Do If CRA Freezes Your Bank Account or Garnishes Wages

Introduction

Few things cause more panic than discovering that CRA has frozen your bank account or garnished your wages without warning. CRA is one of the most powerful creditors in Canada — stronger than banks, credit card companies, and private lenders. It does not need a court order to seize funds. Whether the issue comes from unfiled tax returns, unpaid balances, GST/HST arrears, payroll source deductions, or reassessments you disagree with, CRA collections must be treated urgently and strategically. This guide explains how CRA collections work, why freezes and garnishments happen, and how to stop or reverse them safely.

Why CRA Freezes Bank Accounts

CRA freezes accounts when:
tax returns are unfiled
tax debts remain unpaid
GST/HST returns are missing
payment arrangements were broken
CRA believes the taxpayer is avoiding communication
CRA issues a Requirement to Pay (RTP) to your bank. The bank must immediately freeze the funds and send money to CRA up to the amount owing. You are locked out of your own account entirely until CRA lifts the freeze.

Why CRA Garnishes Wages

CRA can send an RTP to your employer, forcing them to redirect part of your paycheque to CRA. CRA can garnish:
employment income
pension income (CPP, OAS, private pensions)
self-employment receivables
rental income
consulting or contractor payments
CRA garnishes up to:
50 percent of wages
100 percent of contract/self-employment income
Garnishment continues until the debt is paid or a payment plan is negotiated.

How CRA Collections Works

CRA Collections operates separately from CRA Audit. Once your file reaches collections, collectors focus solely on:
collecting balances
issuing freezes
garnishing wages
seizing refunds or benefits
sending liens and RTPs
They do not review tax accuracy — they only enforce payment.

Common Reasons CRA Initiates Collections

unfiled tax returns
unpaid balances
missed instalments
GST/HST collected but not remitted
payroll remittances missing
UHT non-compliance
crypto reassessments
real estate tax owing
ignored CRA letters
Once collections action begins, it escalates rapidly unless handled properly.

Step-by-Step: What to Do When CRA Freezes Your Bank Account

Step 1: Do NOT panic — there is a solution

Freezes can be lifted in 24–72 hours if handled correctly.

Step 2: File all missing tax returns

CRA will not negotiate until you are compliant.

Step 3: Determine the exact balance owing

Identify all outstanding balances — personal tax, GST/HST, payroll, corporate tax.

Step 4: Negotiate a payment arrangement

A CPA can help you negotiate:
reduced monthly payments
multi-year plans
temporary freeze releases

Step 5: Ask CRA to release part of the frozen funds

This requires proof of hardship (rent, food, medical, family needs).

Step 6: Provide CRA with necessary documentation

bank statements
expense summaries
proof of income
financial hardship evidence

Step 7: Ensure future compliance

CRA will cancel payment plans immediately if future filings are missed.

How to Stop a Wage Garnishment

Option 1: Negotiate a Payment Plan

CRA will cancel garnishment once a written plan is accepted.

Option 2: Prove Financial Hardship

Show that garnishment prevents you from covering necessary living expenses.

Option 3: File a Notice of Objection

If the underlying assessment is wrong, filing an objection pauses income-tax collections (but not GST/HST or payroll).

Option 4: File Missing Returns Immediately

CRA often lifts garnishments when compliance is restored.

Option 5: Use the Voluntary Disclosures Program (VDP)

If non-compliance was unintentional and CRA hasn’t contacted you, VDP may remove penalties and reduce balances.

Business Owners: Special Rules Apply

CRA is far more aggressive with businesses. CRA can:
freeze business bank accounts
seize accounts receivable
issue liens on property
demand client payments
CRA especially targets GST/HST collected but not remitted and payroll source deductions, which CRA treats as trust funds.

Directors’ Personal Liability

Directors become personally liable for:
GST/HST
source deductions
corporate income tax in some cases
CRA can freeze a director’s personal account if corporate filings are missing or unpaid.

How to Prevent Collections Action

file returns on time
pay instalments
remit GST/HST monthly/quarterly
avoid mixing business and personal accounts
respond to CRA letters immediately
negotiate payment plans early
Reviewing your CRA account monthly prevents surprises.

When to File a Notice of Objection

If CRA reassessed you incorrectly:
real estate flipping reclassification
business income vs capital gain
ITC denials
crypto reassessment
foreign income
filing a Notice of Objection suspends income-tax collections — protecting you from freezes/garnishments while the dispute is reviewed.

When Taxpayer Relief Can Help

Taxpayer Relief (Form RC4288) may reduce interest and penalties if:
illness
financial hardship
death in the family
natural disaster
CRA delays
However, relief applies only after returns are filed and balances assessed.

Emergency Strategy: Zero-Income or Hardship Proposal

If you cannot pay anything, CRA may temporarily:
reduce payment requirements
suspend collection actions
pause garnishments
This requires careful negotiation and full financial disclosure.

Mackisen Strategy

At Mackisen CPA Montreal, we specialize in stopping CRA collections quickly. We negotiate payment arrangements, lift bank freezes, remove garnishments, file missing returns, prepare hardship documentation, correct incorrect reassessments, and defend clients through objections. Our strategic, structured approach protects your income and restores financial stability.

Real Client Experience

A Montreal nurse had her bank account unfrozen within 48 hours after we coordinated a payment plan. A construction contractor avoided 100 percent garnishment on receivables through negotiations. A restaurant owner with GST/HST arrears secured a multi-year plan that prevented bankruptcy. A landlord reversed a freeze after correcting rental reassessments and filing objections.

Common Questions

Can CRA freeze my account without warning? Yes. Can CRA take 100 percent of my pay? Yes — if you are self-employed. Can collections be stopped? Yes — through negotiation or objections. Will CRA negotiate? Yes — if you are compliant. Should I contact CRA myself? Risky for large debts.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps taxpayers stop CRA collections, negotiate payment terms, and regain control of their finances with expert guidance and strategic tax management.