Canada Revenue Enforcement Actions
As with any creditor, if you owe a tax debt to the Canada Revenue Agency (CRA), there are various forms of enforcement action that may be imposed in an effort to collect. Two of the most popular are garnishing your wages or freezing your bank account. Both are very effective methods – methods that can really wreak havoc on your finances. So, how much can CRA garnish and what options are available to deal with these enforcement actions?
If CRA chooses to impose a wage garnishment, they can garnish your employment income or secondary income like your pension or subcontractor income. That could be a significant amount of money. As we have mentioned previously, CRA does not need a court order to issue a wage garnishment. They simply send a Notice of Garnishment to your employer or your clients and the money is then sent directly to pay off the debt.
If CRA chooses to freeze your bank account, a Requirement to Pay is sent to your bank(s) and the bank is required, by law, to immediately put a hold on your account. This means that you will not be able to access any funds in the account. This also means that any pre-authorized payments won’t come out either. Once the bank has forwarded the amount listed in the Requirement to Pay to CRA, your account(s) is unfrozen. However, if the tax debt is significant, this could take months or even years.
Both of these enforcement measures can have far-reaching consequences. Both can be very embarrassing – your employer/clients will learn of the tax debt, and if your account is frozen you can seriously damage your relationship with your bank. Your credit may also take a hit – if you are missing a significant portion of your monthly income, or have no access to it, those monthly financial obligations may inevitably get missed as well.
If you are being threatened with CRA enforcement action or are already being garnished, you should consider taking action immediately. You have a few options available to you. You can take the matter to court – a costly option with no guarantee of success. You can pay off the debt in its entirety – this will remove both a garnishment and a frozen bank account – but this only works if you have the funds available. The third option is filing a consumer proposal or bankruptcy with a Licensed Insolvency Trustee, both of which will stop the action, can reduce the amount owing, and can give you a fresh financial start.
If you are concerned about a tax debt and the forthcoming enforcement action, we can help.