What does it mean for CRA to garnish wages?
A garnishment, or court order to garnish wages, is an option available to any of your creditors if you have seriously defaulted in payment. Canada Revenue Agency (CRA) has the same rights that any creditor has. If you don’t file your taxes and pay what you owe, CRA can garnish your paycheque.
When CRA chooses to garnish your wages it is usually after many attempts to notify you of your past due balance and encourage you to make payment arrangements. CRA is usually willing to work with someone if reasonable payment arrangements are made.
Why does CRA garnish wages?
CRA will most commonly garnish wages for nonpayment of the following tax obligations:
- Personal income tax. Money owed to the government for income earned during a previous tax year. Sometimes the result of cashing in investments or not paying enough tax during the year (contractors, business owners).
- HST that the government “overpaid” you (in cases where the quarterly HST cheques were issued to you and you were not entitled to receive them).
- HST that you billed for and collected as a self-employed person but did not remit to the government as required.
- Debts that are considered a director’s liability if you are the director of a corporation. Debts such as unremitted employee source deductions.
What to do if you owe
If you owe CRA money and are unable to set up a reasonable payment arrangement with them directly, a consumer proposal or bankruptcy might help. A consumer proposal or bankruptcy provides a legal “stay of proceedings” that will protect you from further action against you. When you sign a proposal or file a personal bankruptcy, CRA, the court and your payroll provider will be sent notice. The order to garnish your wages will be removed by CRA, your employer will be notified and your full paycheque will be issued to you on a go-forward basis. As long as you complete your proposal or finish your bankruptcy, your paycheque will not be garnished again.
A consumer proposal or bankruptcy is the only way to stop a garnishment. A Licensed Insolvency Trustee (LIT) can help you with the necessary paperwork and will work to ensure your garnishment is stopped as fast as possible.
What else can CRA do?
In addition to a garnishment, CRA can take the following actions against you:
- Register a lien against your property.
- Ask your bank to freeze your bank account and/or seize the funds in your account.
- Keep future income tax refunds and/or government benefit cheques to “offset” against the debt you owe. This includes collecting on behalf of Canada Student Loans.
With all of the possible ways that CRA can collect what is owed to them, a garnishment is the most common and efficient. CRA will send the order directly to your employer and your employer will be legally obligated to comply.
Many people don’t act right away because they know what to do. If you’ve got debt and are worried that CRA may take action against you, it’s time to get help. Don’t let CRA garnish wages that you need. Call us at 310-4321 or book online here to stop your wage garnishment.
You owe it to yourself to free yourself from debt.