CRA collections — what happens next

If you owe Revenue Canada money — the CRA, under its current name — the sequence below is what happens next, and in what order.

Tax debt does not sit still. It moves through a defined sequence, and each step is harder to reverse than the last. Knowing the sequence tells you how much room you have, and where the exits are. The steps below set out that CRA debt collection sequence in order, from interest and warnings through garnishment to liens and seizure.

Step one: interest, offsets and warnings

Interest runs on most unpaid balances, with penalties for late filing or payment. Before anything dramatic, the CRA automatically sets off refunds and credits you would receive, such as a GST/HST credit, against your balance. Canada Revenue Agency collections follow a sequence, and knowing where you are in it is what turns panic into a plan.

Before legal action, the CRA generally tries at least one phone warning and sends one written warning letter. A legal warning lasts 180 days, and action can start any time within it.

Step two: garnishment

A garnishment, or requirement to pay, lets the CRA take funds a third party owes you, served on your employer, bank or a customer. Unlike most creditors, the CRA needs no court order, and you often first hear of it from that third party.

Step three: liens and seizure

Before a lien or seizure, the CRA must certify the debt through a provincial judgment or a Federal Court certificate. It can then register a lien on your assets and property, so on a sale the debt is paid from the proceeds before you receive anything.

The CRA can also make another person liable for your debt in defined cases, and seek a court jeopardy order for immediate action where a debt is at risk.

How to stop it: CRA payment arrangements

1. File everything. Unfiled returns block most options and keep penalties running. If a year was assessed without you, see arbitrary assessments.
2. Call before the warning expires. Where you cannot pay in full and can explain your financial situation, a collections officer will work with you on a plan based on your ability to pay.
3. Set up a payment arrangement. This is the mechanism that stops escalation. Our guide to payment arrangements when you cannot pay covers what the CRA asks for.
4. Keep the arrangement. Missing scheduled payments puts you back at the start of the legal-action path.
5. Ask about relief where it applies. Penalties and interest can be cancelled or waived in defined circumstances, which is a separate request from the debt itself.

Does an objection stop collections?

Partly, and not for everyone. After an objection, the CRA normally postpones collecting the disputed amount until 90 days after its decision, but not for amounts you had to withhold and remit, and it can keep collecting corporate amounts even during an objection or Tax Court appeal. Interest generally keeps running.

See how to file a notice of objection, what that rate is this quarter for the daily-compounding prescribed rate, and what each CRA letter means and how long you have to reply.

How long a debt can be collected

The collections limitation period is 6 or 10 years: 10 for individual tax, corporate tax and GST/HST remittance debts, 6 for payroll debt. The clock restarts on many events, including a voluntary payment, a written acknowledgment, a payment proposal, an objection or appeal, a garnishment or a refund applied to the balance. Canada Revenue collections on an old balance do not simply lapse while you wait.

A CRA debt is stressful as well as financial. If it is affecting your sleep or your family, talking to someone helps: Westpeak Wellness offers online counselling across BC, in English, Punjabi or Tagalog.

The bottom line

Collections escalate predictably, and each step is easier to prevent than reverse. What reliably stops them is contact: file outstanding returns, call, and set up an arrangement you can keep. If the business cannot fund its tax bill, that is a planning problem worth fixing with advisory support.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please speak with a CPA before acting on anything here.