Can CRA Garnish or Sue You for Tax and Benefit Debt in Ontario?
Unlike a collection agency or a bank, the Canada Revenue Agency generally does not need to sue you before it takes money from you. Under the Income Tax Act, CRA can send a “requirement to pay” straight to your employer or your bank and skip the courtroom entirely — no Statement of Claim, no judgment, no Notice of Garnishment. The same basic toolkit reaches most federal benefit debts too, including CERB, CRB and EI overpayments. There are real limits on when and how much CRA can take, and one route where its power does end up looking like a judgment — but the process is fundamentally different from being sued by a private creditor. Here is how it actually works.
CRA doesn’t need a lawsuit — it has a “requirement to pay” instead
For a private creditor, wage garnishment only exists after that creditor sues you and wins: it must serve a Statement of Claim, obtain a judgment, and have the court issue a Notice of Garnishment before your employer sends over a dollar. CRA skips all of that. Under section 224(1) of the Income Tax Act, if the Minister knows or suspects that someone owes money to a tax debtor — an employer owing wages, a bank holding a deposit, a client owing an invoice — the Minister can simply require that third party, in writing, to pay CRA directly instead. No court order, no lawsuit, no hearing. A third party who receives this “requirement to pay” and ignores it can become personally liable for the amount.
This is the same mechanism flagged as the main exception in this site’s guide to wage garnishment in Ontario — and it is genuinely different from what happens when you are sued for debt in Ontario, where a court judgment always comes first.
How much can CRA actually take?
There is no equivalent to the Wages Act’s 20-per-cent cap for tax debt. Common CRA practice, described consistently by tax and insolvency professionals, has requirements to pay reaching up to 50 per cent of an employee’s net pay, and up to 100 per cent of amounts owed to a self-employed person or contractor, since invoiced income is not “wages” in the same sense. A requirement to pay sent to a bank can freeze and redirect the full balance in an account, up to the amount owed. These figures reflect CRA’s administrative practice rather than a fixed percentage written into section 224 itself, so treat them as a strong indication of what to expect rather than a guaranteed ceiling.
The 90-day pause — and what resets it
CRA’s power is broad, but it is not immediate. Section 225.1(1) of the Income Tax Act generally bars CRA from starting court proceedings, registering a certificate, or issuing a requirement to pay until 90 days after it sends a Notice of Assessment or Reassessment. If you file a formal objection within that window, collection action on the disputed amount is generally paused again while the objection is under review. This pause has significant exceptions for source deductions and GST/HST amounts, which can move on a faster timeline — worth confirming against your specific notice.
Separately, CRA’s power to collect a tax debt at all generally expires after 10 years under section 222(3) — but that clock resets easily. A collection letter, a requirement to pay, or your own acknowledgment of the debt can each restart the full 10 years. That is a much longer, much easier-to-reset period than the two-year clock private creditors face under Ontario’s Limitations Act, so assuming an old CRA debt has expired is a far riskier bet than making the same assumption about a collection agency.
When CRA does go to court, it skips the trial
CRA has one route that produces something like a judgment: under section 223, it can certify the amount you owe and register that certificate in the Federal Court. Once registered, the certificate is deemed to have the same effect as a judgment of the court — without you ever having had a trial, a defence, or a hearing on the merits the way a private lawsuit requires. That distinction matters if you are already dealing with a private creditor’s claim and assumed CRA would need to follow the same playbook. It does not.
What to do if CRA or a benefit overpayment is already collecting from you
CERB, CRB and EI overpayments generally end up inside this same system. If you are currently receiving EI, an existing debt is typically recovered automatically at 50 per cent of your weekly benefit rate. Otherwise, CRA can apply your income tax refund or GST/HST credit against the debt through a “set-off” — under subsection 164(2) of the Income Tax Act and section 155(1) of the Financial Administration Act — often without advance notice, before ever issuing a requirement to pay. Provincial benefits such as ODSP or Ontario Works are recovered under separate provincial rules not covered here.
A few things genuinely help once CRA or Service Canada is involved:
- Don’t ignore the notices. A Notice of Assessment or a collections letter starts real deadlines, including the 90-day window described above and your window to object.
- Object in writing if you dispute the amount. A timely objection can pause collection on the disputed part of an income tax debt while it is reviewed.
- Ask about a payment arrangement before a requirement to pay is issued. CRA collections officers can and do negotiate terms.
- Keep a paper trail. Track the date of the Notice of Assessment, any objection you file, and any requirement to pay sent to you or your employer.
- Treat a private lawsuit separately. If a collection agency’s Statement of Claim shows up at the same time as a CRA problem, the 20-day deadline to respond to it runs on its own schedule regardless of what CRA is doing.
FAQ
Does CRA have to sue me before garnishing my wages? No. A requirement to pay under section 224 of the Income Tax Act needs no lawsuit, no judgment and no court order — unlike a private creditor, which must sue and win before it can garnish you.
How much of my paycheque can CRA take? Common CRA practice reaches up to 50 per cent of an employee’s net pay and up to 100 per cent of a self-employed person’s invoiced income, though this is administrative practice rather than a fixed statutory limit.
Can CRA take my house for tax debt? Not directly through a requirement to pay. But a certificate registered in Federal Court under section 223 has the same effect as a judgment, which can support further enforcement — the same general concern this site covers in can a creditor take your house in Ontario.
Is there a time limit on CRA collecting old tax debt? Generally 10 years under section 222(3) of the Income Tax Act — but almost any collection action or acknowledgment of the debt restarts the clock, unlike Ontario’s stricter two-year limitation period for private debts.
CRA, a private creditor, or both? Get a clear answer
Whether it is CRA, a benefit overpayment, or a private creditor’s Statement of Claim landing at the same time, the right response depends on which one you are actually dealing with and how far along it is. Request a free case review to find out where you stand.
Sources: Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 224(1); Income Tax Act, s. 225.1; Income Tax Act, s. 223; Income Tax Act, s. 222(3); Financial Administration Act, s. 155; CRA — If you don’t pay your debt: legal action; CRA — Employer who receives a notice of garnishment; CRA — How payments are applied (set-off); Service Canada — EI Overpayments and Repayments; Limitations Act, 2002; Small Claims Court, Ministry of the Attorney General.
General information for Ontario, not legal advice. Reviewed by Angelos Spingos. Last reviewed September 17, 2026.