Canada CRA Debt Collection Guide
the CRA debt collection in Canada. The CRA has the broad collection powers to collect the unpaid tax debt. The set-off (the "tax refund offset") — the CRA automatically deducts any outstanding tax debt from the taxpayer's refund (the "CRA set-off" — the "automatic deduction" of the debt from the GST/HST credit, the CCB, the CAIP, and the tax refund). The garnishment (the "third-party demand") — the CRA issues the "requirement to pay" (the "CRA garnishment letter") to the taxpayer's employer, the bank, or the other third parties — the third party must pay the CRA the amount specified in the letter (the "garnishment" — the "CRA can garnish up to 100% of the salary or the bank account"). The legal action — the CRA can file the "certificate of the debt" in the Federal Court (the "Certificate of the Debt" — the "CRA's lien" — the "CRA's judgment"). The CRA payment plan — the "payment arrangement" (the "CRA payment agreement" — the "monthly instalment plan" — the "pre-authorized debit" — the "PAD"). The CRA interest on the tax debt — the compound daily interest at the "prescribed rate" (9% for the Q3 2025) plus the 4% (the "CRA interest rate" of 13% for the late payments). The CRA penalties — the late filing penalty (the "5% + 1% per month" — up to 12 months), the late payment penalty (the "5% + 1% per month"). The taxpayer relief — the Form RC4288 (the "Request for the Taxpayer Relief") — the CRA can waive the interest and the penalties in the "exceptional circumstances."
CRA Collection Powers
- Set-off: The CRA automatically deducts the outstanding tax debt from any refunds or the credits payable to the taxpayer (the "tax refund set-off" — the "CRA set-off" — the "automatic offset"). The GST/HST credit, the CCB, the CAIP, and the income tax refund are subject to the set-off.
- Garnishment: The CRA issues the "requirement to pay" (the "garnishment letter") to the taxpayer's employer, the bank, or the other third party. The employer must deduct the amount specified in the letter from the taxpayer's salary (the "wage garnishment" — the "CRA can garnish up to 100% of the net salary"). The bank must freeze the taxpayer's bank account and remit the funds to the CRA.
- Certificate of the debt: The CRA can file the "certificate of the debt" in the Federal Court (the "CRA's certificate" — the "CRA's judgment"). The certificate has the "same effect as the court judgment" — the CRA can enforce the judgment through the "writ of the seizure" and the "sale of the property."
- Directors' liability: The CRA can assess the "director of the corporation" for the unremitted source deductions (the "director's liability assessment" — the "director's personal liability" for the CPP, the EI, and the income tax withheld but NOT remitted).
CRA Payment Plans
- Payment arrangement: The taxpayer can request the "payment arrangement" (the "CRA payment agreement") through the CRA My Account or by calling the CRA. The payment arrangement allows the taxpayer to pay the tax debt in the monthly instalments (the "monthly payment plan").
- Pre-authorized debit (PAD): The "pre-authorized debit" agreement — the CRA automatically deducts the payment amount from the taxpayer's bank account on the scheduled dates (the "PAD" — the "pre-authorized payment plan"). The PAD is the "secure payment method" for the CRA debt.
- Interest on the payment plan: The CRA continues to charge the interest on the unpaid balance during the payment plan (the "compound daily interest" at the prescribed rate + 4%). The interest is the "CRA's interest" — the "prescribed rate" is 9% for the Q3 2025 (the "CRA interest rate" of 13% for the late payments).
CRA Interest & Penalties
- Late filing penalty: 5% of the balance due plus 1% per month (up to 12 months). The "repeated late filing" (the "late filing in any of the prior 3 years") — the penalty is 10% plus 2% per month.
- Late payment penalty: The "late payment penalty" applies when the balance due is NOT paid by the deadline (the "failure to pay" penalty). The penalty is 5% of the unpaid amount (if the tax was NOT paid by the due date). The penalty is the "additional penalty" on top of the interest.
- Compound interest: The CRA charges the "compound daily interest" on the unpaid tax and the penalties. The interest rate is the "prescribed rate" (9% for the Q3 2025) plus 4% (the "CRA interest rate" of 13%).
For the CRA audit and the appeals process, see our Tax Audit & Appeals Guide →. For the voluntary disclosures and the taxpayer relief, see our Tax Audit & Appeals Guide →.