Ten years, for income tax. That is the short answer to how long the CRA can collect a debt, and it is the least useful part. The Canada Revenue Agency says the clock for individual and corporate tax starts on the 91st day after it sends you a notice of assessment or reassessment. It then runs for 10 years. But the CRA says making a voluntary payment may restart it. Its own collection actions may restart it too.
We will give you the bad news first. Then the rule, where it comes from, and what to do with it.
The rule, and who wrote it
The limit is in the law. Section 222 of the Income Tax Act says the Minister may not commence an action to collect a tax debt after the end of the limitation period. Subject to the extensions below, it ends 10 years after the day it begins.
That is the good news, and it stops there.
Not every CRA debt runs on the same clock. The CRA’s own page on how long a debt can be collected says the start date and length depend on the type of debt you owe:
| Type of debt | When the clock starts | How long it runs |
|---|---|---|
| Individual tax, corporate tax, COVID-19 subsidies for businesses | The 91st day after the notice | 10 years |
| GST/HST remittance debt | The day after the notice | 10 years |
| Payroll debt | The day after the notice | 6 years |
| COVID-19 benefits for individuals | The date of the decision or notice of redetermination | 6 years |
| Canada Pension Plan, Old Age Security | No limitation period | No limitation period |
Look at the start column before the length. Which notice started your clock, and when was it sent? A business owner who owes payroll, HST and income tax is looking at three rows of this table, not one.
What restarts the clock
This is the part people miss. Section 222 also says a restarted clock ends 10 years after the day it restarts.
The Act lists three ways you acknowledge a tax debt. You promise in writing to pay it. You acknowledge it in writing, even in a letter that refuses to pay. Or you make a payment. A cheque that bounces still counts as a payment for this rule.
The CRA’s page gives a few examples of actions that may restart the limitation period. Actions you take:
- making a voluntary payment
- writing to the CRA to propose a payment arrangement
- providing a written acknowledgment of the debt
- offering security instead of paying the amount owed
- a written request for a reassessment, a notice of objection, or an appeal
- asking the CRA if you can make pre-authorized debit payments
And on the CRA’s side:
- a garnishment or set-off when you do not make voluntary payments
- applying a tax refund or another credit to your debt
- a notice of assessment against a third party for amounts you owe
- certifying your debt in the Federal Court of Canada
- seizure and sale of assets
One more line in section 222 matters. An acknowledgment made by your agent or legal representative has the same effect as if you made it yourself.
Numbers are nice, but what does this mean to you? Say your notice of assessment was sent in mid-May 2018. The clock starts on the 91st day after it, in August 2018, and would end in August 2028. In March 2022 you send the CRA a payment. Section 222 says a taxpayer acknowledges a tax debt by making a payment on account of it. The limitation period restarts on the day the taxpayer acknowledges the tax debt. The new end date is March 2032.
What pauses the clock
Some events do not restart the clock. They stop it, and it picks up where it left off when the event is over. The CRA’s page notes that it can take more than the 6 or 10 years to reach the end. Its own example: an event that extended a 6-year period by 2 years means 8 years in total.
The CRA’s page says a limitation period can be extended when certain events happen. On your side:
- filing for bankruptcy, or making a proposal under the Bankruptcy and Insolvency Act
- becoming a non-resident of Canada after the CRA issues a notice of assessment or reassessment
- a notice of objection or an appeal, for tax debts subject to collection restrictions
On the CRA’s side, the list has accepting security instead of payment of your debt.
The years you never filed
What about a year you never filed? Look at the start column for income tax, GST/HST and payroll again. Then ask which notice started the clock on that year. Do not count on the calendar for a year that was never assessed.
Use the CRA late filing penalty calculator to see, year by year, what each late return added. If you cannot pay the tax owing once the returns are in, read about a CRA consumer proposal.
If you have unfiled years, they come first. Before any plan. Before any offer.
When the clock does run out
It happens. Usually, the CRA says, it cannot take any other action to collect once the limitation period ends. Your debt remains, and you can make voluntary payments. The CRA adds that a voluntary payment after the end should not restart it.
Is the debt cancelled? No. It is a debt the CRA usually can no longer act on. That is a smaller thing than people hope for.
Do not confuse this with the rule you may have read about for old consumer debts. Section 4 of Ontario’s Limitations Act, 2002 sets the basic limitation period for a claim at two years from the day it was discovered. The CRA is different. It has 10 years to collect income tax and GST/HST remittances, plus any extensions, before any restart.
Why waiting it out rarely works
What does waiting actually take? Look at the CRA’s second list again. Applying a tax refund to your debt is on it. If you file a return with a refund while you owe, ask what that refund does to your clock.
Do not plan around the CRA giving up.
If you cannot pay the debt, the answer is not a calendar. Which route fits is a question about your file. Our page on tax debt relief in Ontario covers personal, business and tax debt, including HST, source deductions and tax accounts, and the free consultation starts there.
Before you send the CRA a payment or a letter on an old debt, know which clock it restarts. Ask us before you send it, not after.
Questions people ask
Does CRA debt ever go away on its own?
Not in the way people mean. The CRA gives making a voluntary payment as an example of an action that may restart the limitation period. A garnishment issued when you do not make voluntary payments is another. The end date can keep moving. After the limitation period ends, the CRA says it usually cannot take any other action to collect, but the debt remains. A payment made after the period ends should not restart it.
Does a payment arrangement restart the 10 years?
It may. Writing a letter to the CRA to propose a payment arrangement is one of the CRA’s examples of actions that may restart the limitation period. So is making a voluntary payment.
Is payroll debt on the same clock as income tax?
No. In the CRA’s table, payroll debt runs 6 years, counted from the day after the notice. Individual tax runs 10 years, counted from the 91st day after it.
Does bankruptcy or a proposal reset the CRA’s clock?
It pauses it. Filing for bankruptcy or making a proposal is on the CRA’s list of actions that extend the period. When the event is over, the clock resumes where it left off.
Every file is different, and your buddy’s file is not yours. A neighbour whose tax debt went quiet may have had a clock that ran out. Yours may have restarted last spring. Bring your notices of assessment, and the date of your last payment, to the first conversation. Name any unfiled years first. The first consultation is free. Phone 647-276-8844, or reach us through our debt relief consultation page.
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.