CRA Collections: What to Do If CRA Freezes Your Bank Account or Garnishes Wages – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Few situations create more fear and financial stress than discovering the Canada Revenue Agency (CRA) has frozen your bank account or begun garnishing your wages. CRA has far stronger collection powers than any other creditor in Canada—no court order is required, and enforcement can begin immediately if you ignore tax debts or fail to respond to CRA letters. The good news: even after enforcement begins, there are legal ways to stop, reverse, or negotiate relief. This guide explains why CRA freezes accounts, how wage garnishments work, and what steps you must take to regain control quickly and safely.

Legal and Regulatory Framework

CRA collections powers come from the Income Tax Act, the Excise Tax Act (GST/HST), and the Tax Administration Act (Quebec). CRA can: garnish wages, freeze bank accounts, seize tax refunds and credits, redirect accounts receivable, register liens on property, and seize assets. Unlike other creditors, CRA does not need a court order to take these actions. CRA’s collections division operates separately from its audit or appeals divisions—after a balance becomes collectible, enforcement begins.

Key Court Decisions

In Rennie v. Canada, the Federal Court ruled that CRA must consider a taxpayer’s financial hardship when setting payment terms. In Telfer v. Canada, courts confirmed CRA’s authority to collect outstanding taxes regardless of personal circumstances. In McMillan v. Canada, CRA’s right to issue arbitrary assessments and pursue collection was upheld. These cases illustrate both CRA’s extraordinary power and the limited protections available to taxpayers.

Why CRA Freezes Bank Accounts

CRA freezes bank accounts when taxpayers: ignore collection letters, fail to arrange payment plans, do not file outstanding returns, repeatedly miss GST/HST or payroll remittances, default on prior arrangements, or appear to be avoiding payment. CRA issues a Requirement to Pay (RTP) to the bank, compelling the bank to freeze funds and send available amounts to CRA.

What a Bank Freeze Means

• You lose immediate access to your money

• Automatic payments bounce

• Debit purchases decline

• NSF charges accumulate

• CRA may take all available funds up to the tax debt
  A bank freeze remains until CRA lifts it—and CRA will not lift it until compliance and payment arrangements are completed.

Why CRA Garnishes Wages

CRA sends an RTP directly to your employer requiring them to withhold a portion of your pay. CRA can garnish: employment wages, contract income, pensions, and even rental income. CRA can take up to:

• 50% of employment income

• 100% of contract/self-employment income
  This continues until the debt is paid in full or an arrangement is reached.

Immediate Steps to Take When CRA Freezes Your Account or Garnishes Wages

1. Do NOT Call CRA Collections Yourself

Collections officers are trained to protect CRA—not you. Having a CPA or legal representative communicate is far safer.

2. File All Outstanding Returns

CRA will not negotiate with taxpayers who have unfiled returns.

3. Determine the Exact Debt

Verify CRA’s calculations—many collection actions involve errors from reassessments or missing filings.

4. Request an Immediate Hold on Collections

Your representative can request a temporary hold while negotiating or reviewing assessments.

5. Negotiate a Payment Arrangement

CRA may lift freezes or reduce garnishments once a realistic payment plan is approved.

6. Apply for Taxpayer Relief (If Eligible)

If penalties or interest contributed to the balance because of illness, hardship, or CRA delays, relief may reduce the debt.

7. Challenge Incorrect Assessments

If the debt is based on a wrong reassessment, file a Notice of Objection—this stops many collection actions for income tax (not GST/HST or payroll).

8. Financial Hardship Documentation

Provide CRA with evidence of hardship to reduce garnishments or lift freezes.

How Businesses Are Affected

CRA can freeze corporate accounts, seize receivables, garnish customer payments, and assess director’s liability for GST/HST or payroll debts. Businesses must act quickly to avoid operational collapse.

How to Prevent Future CRA Collections

Stay current with all filings, set up installment reminders, maintain accurate GST/HST and payroll compliance, avoid mixing personal and business funds, and consult a CPA when receiving audit or collection letters.

Mackisen Strategy

At Mackisen CPA Montreal, we take immediate control when clients face CRA collections. We contact CRA on your behalf, request holds, negotiate payment arrangements, correct incorrect assessments, file objections, prepare hardship documentation, and coordinate Taxpayer Relief applications. Our goal is to have freezes lifted and garnishments reduced or removed as quickly as possible.

Real Client Experience

A Montreal contractor had a full bank freeze lifted within 48 hours after we negotiated a structured payment plan. A corporate client facing a 100% contractor garnishment avoided bankruptcy after we corrected GST/HST filings and secured a hardship-based reduction. A retiree had pension garnishments stopped through a successful Taxpayer Relief submission. A business owner avoided director liability after we resolved payroll remittance issues.

Common Questions

Can CRA empty my bank account? Yes—up to the amount you owe. Can CRA garnish 100% of my pay? Yes, for self-employed or contract income. Will CRA warn me before freezing accounts? They usually send letters, but you must act quickly. Can garnishments be stopped? Yes—with proper negotiation and compliance.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal protects taxpayers from aggressive CRA collections. We negotiate quickly, defend your rights, and restore your financial stability while ensuring long-term compliance.