Debt Options Guide
CRA Tax Debt and the Requirement to Pay
Updated
If you owe the Canada Revenue Agency, it can collect without going to court — most often by issuing a Requirement to Pay (often searched as 'CRA ordered to pay') to your employer or bank under section 224 of the Income Tax Act. Your options are to pay in full, negotiate a payment arrangement, request penalty and interest relief, or include personal tax debt in a consumer proposal or bankruptcy.
What a Requirement to Pay is
A Requirement to Pay (RTP) is a legal notice the CRA sends to a third party — usually your employer or bank — requiring them to send money they owe you directly to the CRA. Employers must comply. A bank RTP can freeze funds in your account.
How to respond
- Call the CRA collections number on the notice right away — RTPs are often issued after letters go unanswered
- Ask for a payment arrangement based on your actual budget; be prepared to provide income and expense details
- File any outstanding returns — CRA is more flexible once you are compliant
- If the debt resulted from an error, file a notice of objection within the deadline
Taxpayer relief
Under the taxpayer relief provisions, the CRA can cancel or waive penalties and interest when they resulted from circumstances beyond your control, CRA error or delay, or inability to pay. Requests are made on form RC4288 and are limited to the past ten calendar years. The tax itself is not cancelled.
Tax debt in a consumer proposal or bankruptcy
Personal income tax debt is an unsecured debt and can be included in a consumer proposal or bankruptcy, which stops the RTP once filed. Note that when tax debt is more than a large share of total debts, CRA may vote against a proposal, and in some bankruptcies a large tax debt can affect the discharge. A Licensed Insolvency Trustee can tell you how this applies to you.
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Related guides
- Consumer Proposal in Canada: How It WorksHow a consumer proposal works in Canada: who qualifies, the $250,000 limit, the 5-year maximum, the creditor vote, credit impact and what it costs.
- Bankruptcy in Canada: How It WorksHow personal bankruptcy works in Canada: the 9 or 21 month discharge, surplus income, exempt assets, which debts survive and how long it stays on your credit report.
- What Is a Licensed Insolvency Trustee?What a Licensed Insolvency Trustee does in Canada, how fees are regulated, what to bring to the first meeting and how to check a trustee's licence with the OSB.
Sources
DebtDefender is an independent information site, not a Licensed Insolvency Trustee or law firm. This guide is general information, not advice for your situation. See our disclaimer.