How to Stop a CRA Wage Garnishment
The CRA can take part of your pay without a court order. Filing a consumer proposal or bankruptcy stops it the day your trustee files.
Robert Johnson, CPA, CA, CIRP
Licensed Insolvency Trustee
or call 587-701-5681
Updated:
The CRA doesn’t need a court order to garnish wages. It sends your employer a Requirement to Pay, and part of your wages goes to the Receiver General instead of to you.
There are ways to stop it. Pay the balance in full, agree a payment arrangement the CRA accepts, or file a consumer proposal or bankruptcy through a Licensed Insolvency Trustee.
A payment arrangement works if the CRA agrees your terms. Deductions continue until it does.
Filing a consumer proposal or bankruptcy stops the garnishment the moment your trustee files with the OSB. It triggers an automatic stay of proceedings under the Bankruptcy and Insolvency Act.
In this guide
How the CRA garnishes your pay without a court order
The Canada Revenue Agency (CRA) is not an ordinary creditor. It can collect unpaid taxes by garnishing wages and bank accounts without a court order.
A regular creditor, such as a credit card company, must sue you, win a court judgment, and obtain a formal notice of garnishment before they can touch your paycheque. But the CRA is different.
Under section 224 of the Income Tax Act and section 317 of the Excise Tax Act, the CRA has the power to issue a legal notice called a Requirement to Pay directly to your employer, bank, or anyone who owes you money. This allows them to garnish wages or seize funds quickly.
As a result, a portion of your pay may be directed to the Receiver General (the federal government) instead of to you.
Source: Income Tax Act – Section 224 and Excise Tax Act – Section 317
Your employer gets no say in it. They must comply or face liability for the amount. The same notice served on your bank is what people call a frozen bank account.
This notice affects more than your paycheque. The CRA can also take from government benefits like Employment Insurance (EI) and the Canada Pension Plan (CPP). Where the debt is unremitted payroll deductions or GST/HST, the CRA’s notice ranks ahead of even a secured lender.
Source: Canada Revenue Agency – How to process a garnishment from the CRA
The fastest ways to stop a CRA wage garnishment
You can stop a CRA wage garnishment by resolving the underlying debt. See our CRA tax debt relief guide for ways to reduce or clear what you owe. If you pay the balance in full, the wage garnishment will end. However, you might not be able to do that.
The next option is to set up a payment arrangement, allowing you to pay the CRA over time. Generally, the CRA will release the garnishment once acceptable terms are in place, but it must accept your terms first.
This process may take days or longer, and money will continue to be deducted from your pay until it’s resolved. Interest continues to accumulate on the outstanding balance until it is paid in full.
Source: Canada Revenue Agency – Payment arrangements
Taxpayer relief provisions can cancel or waive penalties and interest at the CRA’s discretion, but they cannot eliminate the actual tax owed. It doesn’t stop a wage garnishment, and the CRA can only go back 10 years on a request. Deductions keep coming off your pay while it’s being considered.
Filing a consumer proposal or bankruptcy immediately stops collection efforts and wage garnishment by law. An automatic stay of proceedings occurs as soon as the Licensed Insolvency Trustee files with the Office of the Superintendent of Bankruptcy (OSB). Your employer will be notified to stop any further deductions from your paycheque.
Source: Canada Revenue Agency – Limitation period on exercising discretion; Bankruptcy and Insolvency Act – Section 69.2 (consumer proposal) and Section 69.3 (bankruptcy)
| Route | What it does | How fast it stops the garnishment |
|---|---|---|
| Pay the balance in full | Clears the debt, so the requirement to pay ends with it | Right away, once the CRA processes the payment |
| Payment arrangement | You pay over time, and the CRA releases the garnishment once they accept the terms | Days to weeks, if the CRA agrees |
| Taxpayer relief provisions | Waives penalties and interest only, not the tax | It does not stop the garnishment on its own |
| Consumer proposal or bankruptcy | Triggers an automatic stay of proceedings under the BIA | Immediately on filing with the OSB |
How a Requirement to Pay affects self-employed individuals
A Requirement to Pay is a legal notice from the Canada Revenue Agency (CRA) that targets anyone who owes you money or is holding it on your behalf.
For employees, this is typically their employer. However, if you are self-employed and don’t receive a paycheque, the CRA will go after your bank account and the clients who owe you money for unpaid invoices instead.
Under section 224 of the Income Tax Act, the CRA can step in and redirect payments meant for you to the Receiver General if you owe taxes. For contractors, this means the invoice you’re waiting on could end up with the CRA instead of you. Your client also finds out you owe the CRA money.
Source: Income Tax Act – Section 224
Provincial wage exemption rules don’t apply here. Those limit what an ordinary creditor can take, and they don’t bind the CRA, which collects under federal law.
The same solutions apply to resolving debt. Pay it, set up a payment arrangement, or file a consumer proposal or bankruptcy.
Can the CRA take your tax refund as well?
Yes, in addition to garnishing wages, the CRA can apply your income tax refund and credits toward your outstanding balance.
This is called a refund set-off, and it happens automatically. The CRA applies the refund to what you owe and tells you afterwards.
Source: Income Tax Act – Section 164(2)
Stopping the offset is the same process as stopping the garnishment. Either pay the debt, set up a payment plan, or file for a consumer proposal or bankruptcy.
If you decide to declare bankruptcy or file a consumer proposal, the CRA will manage your refunds starting from the date of your filing. Refunds for previous tax years will typically be directed to the estate instead of being paid directly to you.
A garnishment and a refund set-off are two of several tools the CRA uses. To find out more about what it can do and how each option compares, see CRA tax debt relief.
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FAQs
CRA wage garnishment FAQs
Not without any notice, but there’s not much warning. The CRA sends a legal warning letter before it garnishes, and it says it will send you a copy of any garnishment request made against your debt. What it doesn’t do is tell you the date. Your employer often knows before you do, and the first sign for most people is in their paycheque.
Source: Canada Revenue Agency – Garnishing your income and accounts
The CRA does not have a set limit on garnishments, and there’s no calculator to determine the amount. While provincial rules limit what regular creditors can take, the CRA decides based on your income and debt. If the deductions make it hard for you to cover essential expenses like rent and food, it’s important to speak with the CRA or a Licensed Insolvency Trustee.
The process varies and isn’t automatic. The CRA usually starts with a notice of assessment, then demand letters, and finally a warning about garnishment. Ignoring these moves the debt to the next stage of collection. Those who respond and agree on terms are less likely to be garnished, while those who ignore it often face garnishment.
Lifting a garnishment cannot be done online. To remove it, you must pay the full balance, arrange a payment plan with the CRA, or file a consumer proposal or bankruptcy. There is no online option available, so contact the collections officer listed on your legal warning letter for assistance.
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Stop CRA wage garnishment
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or call 587-701-5681
Robert Johnson, CPA, CA, CIRP, Licensed Insolvency Trustee
Robert Johnson is a Licensed Insolvency Trustee (LIT) with Moses Advisory Group Inc. He brings over 20 years of experience and has helped thousands of Canadians resolve their debt through consumer proposals, bankruptcy, and debt restructuring. Robert is licensed by the Office of the Superintendent of Bankruptcy and is a member of CAIRP, the Canadian Association of Insolvency and Restructuring Professionals.