Can CRA garnish my bank account?

By Bader A. Chowdry, CPA, CA, LPA | Insight Accounting CPA

Yes, the Canada Revenue Agency has extensive legal authority to garnish your bank account without going to court. Unlike most creditors who must obtain a judgment first, the CRA can issue a Requirement to Pay (RTP) directly to your financial institution, freezing and seizing funds to satisfy outstanding tax debts, penalties, and interest.

Understanding how CRA garnishment works—and how to prevent or stop it—is critical for anyone with tax obligations in Ontario and across Canada.

How CRA Bank Garnishment Works

When you owe the CRA money and haven’t made payment arrangements, they can issue a Requirement to Pay (RTP) to any third party holding funds on your behalf. For bank accounts, the process works like this:

Step 1: CRA issues the RTP to your bank. The bank is legally required to comply immediately.

Step 2: Your bank freezes the account. All funds in the account on the date the RTP is received are frozen and cannot be accessed.

Step 3: The bank remits frozen funds to the CRA within the timeframe specified in the RTP (typically 30 days).

Step 4: The garnishment continues. Unless the RTP specifies otherwise, the bank must remit all future deposits to the CRA until the full debt is paid or the RTP is released.

You’ll typically receive no advance warning—the first indication is often a bounced payment or frozen debit card. The CRA is not required to notify you before issuing an RTP, though they must send a copy after issuance.

What Triggers CRA Bank Garnishment?

The CRA doesn’t garnish accounts randomly. Typical scenarios include:

Outstanding tax debt with ignored collection notices. The CRA sends multiple letters and makes phone calls before escalating to garnishment. Ignoring these communications accelerates enforcement.

Unfiled tax returns. If you haven’t filed taxes for multiple years, the CRA may issue arbitrary assessments and garnish to collect the estimated amounts.

Broken payment arrangements. If you default on a negotiated payment plan, the CRA often moves directly to garnishment.

Unremitted payroll source deductions. Employers who collect CPP, EI, and income tax from employees but fail to remit to the CRA face aggressive collection, including immediate garnishment. Director liability means the CRA can garnish personal accounts of corporate directors.

GST/HST debt. Businesses that collect GST/HST but don’t remit it to the CRA are considered to be holding funds in trust. Failure to remit triggers rapid enforcement.

Understanding what triggers a CRA audit helps you avoid situations that lead to outstanding tax debts.

How Much Can the CRA Garnish?

For bank accounts: The CRA can garnish 100% of the funds in your account, subject to limited exemptions. There’s no “exempt amount” for basic living expenses like there is for wage garnishment.

For wages: If the CRA garnishes your employment income directly from your employer, they must leave you a minimum amount based on personal exemptions (approximately $200-$400 biweekly for a single person, more for dependents). However, this protection doesn’t apply to bank account seizures.

For business accounts: The CRA can seize all funds in business accounts, which can cripple operations overnight. Small businesses in Mississauga and the GTA should maintain separate accounts for tax remittances to avoid sudden operational collapse.

Joint accounts: If you have a joint bank account (e.g., with a spouse), the CRA can garnish your share. However, co-owners can dispute the garnishment by proving which funds belong to them. This requires immediate legal and accounting intervention.

How to Stop a CRA Bank Garnishment

If your account has been garnished or you’ve received notice of an RTP:

1. Contact the CRA immediately. Call the number on the RTP notice or your Notice of Assessment. Explain your situation and propose a payment arrangement.

2. Propose a payment plan. The CRA may release the garnishment if you commit to a realistic payment schedule. You’ll need to provide financial disclosure (income, expenses, assets, liabilities).

3. Pay the debt in full. If you can access funds from another source (family loan, line of credit), paying the full amount immediately stops the garnishment and prevents future RTPs.

4. Request taxpayer relief. If you can demonstrate circumstances beyond your control (serious illness, natural disaster, financial hardship), you may qualify for penalty and interest relief under the CRA’s Taxpayer Relief provisions. This doesn’t eliminate the principal tax owed but can significantly reduce the total debt.

5. File a dispute or objection. If you believe the assessment is incorrect, you can file a Notice of Objection. However, filing an objection doesn’t automatically stop collection—you must also request a collection hold, which the CRA may or may not grant.

6. Get professional help. Our corporate tax planning team at Insight Accounting CPA in Toronto has extensive experience negotiating with CRA collections and securing favorable payment arrangements. Professional representation often yields better outcomes than self-representation.

Can the CRA Garnish Joint Accounts or TFSA/RRSP?

Joint accounts: Yes, the CRA can garnish joint accounts to satisfy your debt, though the co-owner can dispute their share. Keep tax debt exposure separate from shared finances where possible.

TFSA (Tax-Free Savings Account): Yes, despite the “tax-free” name, TFSAs are not protected from CRA garnishment.

RRSP (Registered Retirement Savings Plan): Generally, RRSPs are protected from CRA garnishment until you withdraw funds. Once withdrawn, the funds become seizable. The CRA can also issue an RTP to your RRSP provider for future withdrawals.

RESP (Registered Education Savings Plan): RESPs have some protection, but the CRA can garnish them in certain circumstances, particularly if the debt is related to overpayment of benefits.

Preventing CRA Garnishment

The best defense is proactive tax compliance:

File all tax returns on time, even if you can’t pay the full amount. Filing stops arbitrary assessments and keeps penalties from escalating.

Communicate with the CRA. If you’re having trouble paying, contact them before they contact you. Early payment arrangements prevent enforcement.

Keep accurate records. Proper bookkeeping helps you stay on top of tax obligations and avoid surprises. Our Mississauga accounting firm provides year-round support to ensure you’re never caught off-guard.

Separate accounts for trust amounts. If you collect GST/HST or payroll deductions, keep those funds in a separate account so you’re not tempted to use them for operations.

Plan for tax installments. If you have business or investment income not subject to withholding, the CRA requires quarterly installment payments. Missing installments triggers interest and eventually collection action.

Consider incorporation strategically. While incorporating your business doesn’t eliminate tax obligations, it can create clearer separation between business and personal finances, reducing the risk that business tax issues impact personal accounts.

What About Bankruptcy or Consumer Proposals?

Both personal bankruptcy and consumer proposals can stop CRA garnishment through an automatic stay of proceedings. However:

• Tax debt is treated as unsecured debt in bankruptcy (you’ll discharge most of it)
• The CRA is a creditor in the proceeding and can object
• Director liability for corporate taxes may survive bankruptcy
• You must weigh the long-term credit impact against the tax relief

These are complex decisions requiring professional guidance from both an accountant and a Licensed Insolvency Trustee.

The Cost of Ignoring CRA Debt

Beyond bank garnishment, the CRA can:

• Garnish wages by sending RTPs to your employer
• Place liens on property, preventing sale or refinancing
• Seize and sell assets, including vehicles and real estate
• Offset refunds and benefits, including GST credits and child benefits
• Pursue criminal charges in cases of deliberate evasion

The cost of CRA compliance is always lower than the cost of enforcement. Professional accounting support pays for itself by preventing these scenarios.

Facing CRA garnishment or tax debt? Call Insight Accounting CPA at (905) 270-1873 or start here.

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Frequently Asked Questions

Will the CRA notify me before garnishing my bank account?

The CRA is legally required to send you a copy of the Requirement to Pay after issuing it, but they don’t have to provide advance warning. Typically, you’ll have received multiple collection letters and calls before garnishment, but if you’ve moved or changed contact information without updating the CRA, garnishment may be your first indication of a problem.

Can I open a new bank account to avoid CRA garnishment?

While you can open a new account, the CRA has access to information-sharing agreements with financial institutions and can discover new accounts. More importantly, moving funds to avoid collection is illegal and can result in criminal charges for tax evasion. The right approach is to address the debt directly through payment arrangements or dispute resolution.

How long does a CRA bank garnishment last?

An RTP typically remains in effect until the full debt (including interest and penalties) is paid, or until the CRA formally releases it. If you negotiate a payment arrangement, the CRA will usually release the garnishment once you’ve made several on-time payments demonstrating compliance. Without resolution, the garnishment can continue for years.

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Insight Accounting CPA provides tax debt resolution, CRA negotiation, and audit defense for individuals and businesses throughout Mississauga, Toronto, and Ontario. Our AI-powered accounting solutions with patent-pending governance frameworks help you stay compliant and avoid collection issues. We also offer fractional CFO services to implement financial controls that prevent tax debt situations.

Get help now: (905) 270-1873 or start the conversation.