A CRA requirement to pay notice is your copy of a garnishment. It is not a bill. The Canada Revenue Agency has told a third party, usually your employer or your bank, to send it money that would otherwise go to you. The order runs up to a stated maximum. For an income tax debt, the CRA needs no court order to do this. The third party must comply.
That is the bad news, and you should hear it first. The rest of this page is what you can do about it.
The letter is a copy, not a request
Who is the document addressed to? Not you. A Requirement to Pay goes to someone who owes you money or holds money for you. The CRA’s own wording is that it “will send you a copy of any garnishment request made related to a debt you owe.” The letter in your hand is that copy.
The CRA uses three garnishment documents. Your copy names one of them:
- Requirement to Pay, or RTP: used for income tax, corporate tax, payroll deductions and GST/HST. No court order is needed, except to collect COVID-19 benefits from an individual.
- Enhanced Requirement to Pay, or ERTP: used for payroll deductions and GST/HST remittances. It can rank ahead of even secured creditors.
- Demand on a third party, or DTP: used for federal program debts such as Employment Insurance, Canada Pension Plan or a Canada Student Loan.
The first word on the page narrows down which kind of debt is being collected. The account number on the page identifies it.
What normally comes before it
An RTP should not be the first you hear of the debt. That is the CRA’s own policy. For a personal debt, the CRA says that before legal action it will generally make “a minimum of 1 attempt to give you a verbal legal warning by phone” and send “1 written legal warning letter”. That warning stays valid for 180 days.
Business accounts move faster. For payroll and GST/HST remittance debts, the notice of assessment itself counts as the written warning. Legal action can start once a phone warning has been attempted.
Most income tax assessments also carry a waiting period. The CRA’s collections policy says it cannot normally require a third party to pay it until 90 days after the notice of assessment or reassessment is sent. Payroll source deductions do not get that wait. Neither does GST/HST.
If you have an unopened pile of CRA mail, open it now. The warning letters are in there, and so are the dates.
Reading your copy: five things to find before you call anyone
Find these five items and write them down before you call anyone.
| Find this on the page | Why it matters |
|---|---|
| The document type: RTP, ERTP or DTP | Narrows down the kind of debt and shows how much priority the CRA has |
| The third party it was sent to | Your employer, your bank, a tenant, a client: that is where the money is being stopped |
| The maximum amount | The ceiling. The third party keeps sending until this total is reached |
| The withholding instruction | A fixed amount per payment, a fixed amount per period, or a percentage of each payment. With no instruction, each payment is taken in full until the maximum is reached |
| The effective period and the contact number | How long it runs, and the CRA officer who owns your file |
How long does it last? The CRA’s guidance on processing a garnishment says the effective period is generally one of three: 90 days, 1 year, or until the debt is paid in full. “Until paid in full” does not lapse on its own.
What a requirement to pay can reach
A garnishment reaches well past the paycheque. The CRA lists, among other things:
- salary, wages, commissions and bonuses
- money held at a financial institution
- rent or lease payments owed to you
- accounts receivable, which for a small business means your customers’ payments
- annuity, interest, dividends and other investment proceeds
- the proceeds of an insurance claim
Run the list against your own week: the employer who pays you, the customer who owes you on an invoice, the bank that holds your savings. Each one can be sent an RTP. For a self-employed person, the invoice hurts most. The client who owes you must pay the CRA instead.
What will not stop it
Calling your employer or bank to explain will not help. The CRA instructs third parties to keep complying “unless we tell you in writing that it has been withdrawn.” Only the CRA, a statutory stay, or a formal insolvency filing can lift it. Anyone who says a call to your employer or bank ends a garnishment is selling you something.
A payment arrangement made after the fact will usually not stop it either. The CRA’s collections policy says that once it issues a Requirement to Pay, it will “usually not stop or withdraw these actions until the account is paid in full, or when it can be shown that the action is causing financial hardship.”
So what can lift an RTP short of full payment? Three things: a formal objection when the debt is income tax you dispute, a hardship review, and a formal insolvency filing. An arrangement pays the full debt over time. By itself it usually does not withdraw an RTP. An RTP issued for 90 days or 1 year covers payments only for that period. The debt remains, and the CRA can issue another. Neither an objection nor an insolvency filing is certain to return money the CRA has already collected.
All three routes start with the same work. Write out your income, your expenses, your assets and your debts. Do it before the first call, not after.
Hardship and payment arrangements are the CRA’s to grant
A payment arrangement is made between you and the CRA. The CRA’s tax collections policies say a collections officer will consider an arrangement “based on your ability to pay”. That happens once you have “tried all reasonable ways of getting the necessary funds”. You will be asked for documents covering your income, expenses, assets and liabilities. The officer may verify them.
A hardship case rests on the same documents. Can the garnishment leave you unable to cover rent, food or the cost of keeping your job? Then the officer needs to see it in numbers.
If you think the assessment is wrong
An RTP usually collects a debt that has already been assessed. If the assessment itself is wrong, the formal route is a notice of objection. For an assessment issued by Collections, the CRA’s policy directs you first to call the number on the assessment with any new information. A call does not extend the objection deadline.
The deadline is set by section 165 of the Income Tax Act. You object within 90 days after the CRA sends the notice of assessment. For an individual, the deadline is the later of that day and one year after the filing-due date of the return.
What does an objection do to the garnishment? Section 225.1 of the Income Tax Act answers it. For personal and corporate income tax, once you serve a notice of objection, the CRA cannot require a third party to pay the amount in dispute, unless a court finds collection is in jeopardy. The hold lasts until 90 days after the CRA tells you it has confirmed or changed the assessment. An appeal to the Tax Court of Canada holds collection of the disputed amount in the same way. That hold runs until the Court mails you a copy of its decision or you discontinue the appeal. A large corporation is the exception. The same section lets the CRA collect half of the amount assessed from it.
Payroll deductions, GST/HST and other trust amounts work the other way. The CRA’s policy is that collection action can continue “even if you file a notice of objection or appeal to the Tax Court of Canada.” Do not build a plan on objecting to a trust debt.
Was the debt an arbitrary assessment, issued because returns were never filed? Then file the returns. If the objection deadline has not passed, object. If it has passed, the Income Tax Act lets you apply for an extension within one year after it. The CRA can refuse it. Our CRA late filing penalty calculator shows what the late years have added.
If a consumer proposal or bankruptcy is filed
A filing with a Licensed Insolvency Trustee changes the position. The federal bankruptcy regulator sets out the rule on its page that compares the debt solutions. Once you file, creditors must stop their collection action. That includes a garnishment of your salary or wages. For the tax debts the filing includes, the CRA is one of those creditors.
Two cautions. First, the CRA tells employers and banks to keep honouring the garnishment until they receive written confirmation of the insolvency filing. A deduction can still be taken before that confirmation arrives. Ask the trustee about any money taken after the filing date. Second, source deductions owed by an employer stand in a different position from personal income tax. Our post on how a consumer proposal treats CRA tax debt goes through what is included, how the CRA votes, and what the stay of proceedings does not return.
The rest of the tax file
A Requirement to Pay is often only the part of the tax problem you can see. Unfiled years may sit behind it. So may a business account that fell behind, or a director’s liability question. Before you choose a route, list three things. Which account is the RTP collecting? What else could the CRA reach from the list above? Which assets do you need to protect?
Our page on tax debt relief in Ontario for families and business owners covers personal tax, HST, source deductions and director’s liability together. That is usually how they arrive.
Every file is different, and a friend’s garnishment is not yours. Bring the copy of the RTP to the first conversation, and tell us the date printed on it at the start. If you have unfiled years, tell us that too. The first consultation is free, and so is every one after it. Call 647-276-8844 or book a free debt relief consultation.
Questions about a CRA requirement to pay
What is a CRA “requirement to pay issued” letter?
It is your copy of a garnishment the CRA has sent to a third party, such as your employer or bank. It tells that third party to pay the CRA money it would otherwise pay to you or hold for you. The total is capped at the maximum printed on the first page.
How long does the CRA give you to pay before it garnishes?
For most personal income tax assessments, the CRA’s collections policy says it cannot normally start this kind of action until 90 days after the notice of assessment is sent. It will generally attempt a phone warning and send one written warning first. That warning stays valid for 180 days. Payroll and GST/HST debts can move to legal action once a phone warning has been attempted.
Can the CRA freeze my bank account?
Yes. Money held at a financial institution is one of the payment types a requirement to pay can reach. The bank must send the CRA the amount the document instructs, up to the stated maximum, while the garnishment is in effect.
Does a notice of objection stop the garnishment?
For income tax you dispute, yes, for the disputed amount. Section 225.1 of the Income Tax Act holds collection of it until 90 days after the CRA confirms or changes the assessment. For payroll deductions and GST/HST, no. The CRA can keep collecting.
Where we fit
Get Total Debt Relief is a debt consulting and representation firm, not a Licensed Insolvency Trustee. Only a Licensed Insolvency Trustee can file your documents for a consumer proposal or a bankruptcy with the Superintendent of Bankruptcy. However, he is not the only one you should get your information from. Unlike a Trustee, we look to preserve your equities and assets, not liquidate them. What we do is make sure you only pay what you have to pay, not what someone thinks you can pay. We use every tool available to make sure you protect your home, your business and other equities as well as Spousal rights. Once you’re ready to move forward with whichever process you choose, that’s when it’s time to move on to the selection of a Trustee. Please keep in mind that if for any reason, you have to deal with a legal matter during your Bankruptcy or Proposal, a Trustee can NEVER legally represent you. However, he CAN act against you. Choose your representation wisely!
DISCLOSURE:
Get Total Debt Relief is a debt consulting and representation firm. We are not a Licensed Insolvency Trustee, and we are not connected to the Canada Revenue Agency or any government body.
Only a Licensed Insolvency Trustee can file your documents for a consumer proposal or a bankruptcy with the Superintendent of Bankruptcy.
OUR SERVICE:
However, any Trustee you choose can’t legally represent you over your Creditors nor can he give you any advice that will benefit you over your Creditors. The Trustee’s job is to maximize how much he can get from you and your estate for the benefit of your Creditors and the more he collects in a Proposal, the more he makes.
What we do is the work before the filing and the path you choose will come from the advice and information that goes with it. More importantly, we use tools that are not available to the Trustee because of who’s interests he represents. We go through your whole situation with you. We answer your questions, for as long as it takes and as many times as you need to ask them. Every consultation is free and if or when you decide to move forward, you’ll know which option best suits you, your family and or your business. And, unlike the Trustee, we will NEVER use the information you’ve given us against you in Court. The bottom line is that we don’t look to liquidate your assets and equities, we look to protect them.