Negotiating a Payment Plan with CRA to Avoid Legal Action

When you owe CRA money — whether from income tax, GST/HST, payroll source deductions, real estate reassessments, crypto gains, rental income corrections, or corporate arrears — the worst thing you can do is ignore the debt. CRA has extraordinary legal powers: wage garnishments, bank freezes, liens, and Requirement to Pay Notices. However, CRA also allows taxpayers to negotiate payment arrangements, enabling them to pay over time instead of facing aggressive enforcement. This guide explains how to negotiate a payment plan with CRA properly, what CRA looks for during negotiations, and how to avoid legal consequences while restoring compliance.

Why CRA Allows Payment Arrangements

CRA recognizes that taxpayers may experience:
temporary financial hardship
unexpected reassessments
business cash flow disruption
major life events
economic downturns
Payment plans allow CRA to collect the debt while avoiding extreme enforcement, as long as the taxpayer cooperates and stays compliant.

When You Need a CRA Payment Plan

You need a payment plan when:
you cannot pay the balance in full
CRA threatens collections
RTP notices were issued
your wages are garnished
your bank account is frozen
you are behind on GST/HST
corporate payroll remittances are missed
a tax reassessment has created a sudden liability
A payment plan protects you from collections action — if negotiated correctly.

What Debts Can Be Included in a CRA Payment Plan

income tax
GST/HST
corporate income tax
UHT
director’s liability
payroll remittances
CRA allows combined or separate arrangements depending on the account type.

How CRA Decides Whether to Approve a Payment Plan

CRA evaluates:
your income
your monthly expenses
your assets
your liquidity
your past compliance
your current filing status
CRA must believe the plan is realistic and that you can keep up with future obligations.

Before Negotiating: Key Requirements

1. All tax returns must be filed

CRA will not negotiate payment terms if returns are outstanding.

2. You must understand the exact balance owing

Including:
tax
penalties
interest
CRA may update balances before approving the plan.

3. You must avoid creating new balances

Future compliance is mandatory.

4. You must provide financial disclosure

CRA may request:
pay stubs
bank statements
business cash flow statements
expense summaries
This helps CRA verify that the plan is aligned with your financial reality.

How to Negotiate a Payment Arrangement: Step-by-Step

Step 1: Contact CRA Collections or Have a CPA Represent You

A CPA negotiates more favorable terms and prevents harmful disclosures.

Step 2: Propose a Realistic Monthly Payment

CRA expects payments that cover:
a portion of the principal
ongoing daily interest

Step 3: Prove Financial Hardship (if applicable)

Provide documentation for:
rent/mortgage
utilities
groceries
transportation
medical costs
childcare
CRA cannot legally force taxpayers into unmanageable poverty.

Step 4: Request Temporary Relief for Urgent Cases

For clients with:
bank freezes
garnishments
merchant freezes
CRA may temporarily lift or reduce enforcement if a plan is being negotiated.

Step 5: Formal Agreement

CRA will:
confirm payment amounts
set due dates
clarify future compliance rules

Step 6: Maintain the Agreement

There are zero exceptions — missing a single payment can cancel the plan.

Special Considerations by Debt Type

Income Tax Debts

Collections are paused if a Notice of Objection is filed.

GST/HST Debts

Collections continue — Objections do not stop enforcement.

Payroll Remittance Debts

CRA treats these most seriously. Missed payments may lead to:
director’s liability
100% enforcement

Corporate Debts

CRA may require a director guarantee.

What Happens If You Do NOT Negotiate

CRA may:
freeze your bank accounts
garnish wages
send RTPs to clients and tenants
seize refunds
place liens on property
escalate to legal collections
CRA can collect without court approval.

How to Reduce the Amount Owed Before Negotiating

1. Taxpayer Relief (RC4288)

May cancel penalties and part of the interest.

2. VDP (Voluntary Disclosures Program)

Eliminates penalties if CRA has not contacted you.

3. Notice of Objection

If the tax assessment is incorrect, dispute it before paying.

4. Corporate restructuring

May reduce payroll and GST liabilities.

5. Crypto and ACB reconstruction

Correct calculations reduce balances for crypto investors.

How to Prevent Defaulting on the Payment Plan

set reminders
automate payments
stay current with GST/HST
avoid late filings
monitor CRA account weekly
A single missed payment can restart enforcement.

Mackisen Strategy

At Mackisen CPA Montreal, we negotiate payment plans that stop CRA enforcement, prepare financial disclosure packages, apply for Taxpayer Relief, correct assessments, challenge inaccurate balances, lift bank freezes, stop garnishments, and maintain compliance. We protect clients from legal action while restoring financial stability.

Real Client Experience

A Montreal tradesman avoided wage garnishment after negotiating a 24-month plan. A restaurant owner with GST arrears had bank freezes lifted through structured payments. A consultant avoided director’s liability by catching up on payroll filings and negotiating a combined plan. A real estate investor reduced his liability through objections before negotiating payments.

Common Questions

Does CRA always negotiate? Yes, if compliance is restored. Can CRA refuse? Yes, if the plan is unrealistic. Do objections stop enforcement? Only for income tax. Can CRA seize assets during a plan? Only if you default. Should I negotiate myself? Risky — CRA collections is aggressive.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal negotiates strategic payment plans that stop enforcement, protect assets, and give taxpayers and businesses the time they need to resolve tax debts safely.