Once a taxpayer owes money to the Canada Revenue Agency, the file eventually lands in the collections department — and dealing with a CRA collections officer is unlike dealing with any private-sector collector. The single most important thing to understand is the officer's incentives, because they explain almost everything that follows.
The collector is rewarded for closing files, not collecting money
Many business owners find CRA collectors baffling. They behave so differently from private-sector counterparts because they are not incentivized to collect revenue. Somewhere up the chain of command are people who care about how much tax gets collected, but for some reason that priority never trickles down to the officers themselves. Instead, the collector is rewarded for closing files — and the more files closed, the better the performance evaluation, even when a file "closes" because the business was forced into bankruptcy. More bankruptcies mean more closed files, which means better numbers for the collector.
This is counter-intuitive and, frankly, dangerous for a taxpayer who assumes the person on the other end of the phone simply wants to be paid. The collector may be perfectly content to suffocate a viable business into closure rather than negotiate a payment plan, because closure clears the file.
Not everyone gets a human collector
Not every taxpayer who owes tax is assigned to a collections officer. An algorithm inside the CRA's computer decides whether and when to assign a human collector rather than simply send letters. A practical piece of advice flows from this: once a taxpayer knows a tax debt is coming — even before it is assessed or collectible — they should start making payments. If the debt will be $10,000 and the taxpayer can afford $1,000 a month, sending in post-dated cheques can keep the file out of a human collector's hands entirely. If enough payments clear, and the computer is satisfied with their size and frequency relative to the debt, the taxpayer will keep receiving statements of account but will not be called, pressured, or threatened. Keep the computer happy, and the taxpayer stays happy.
If the computer is not quite happy but not unhappy enough to assign an officer, a call may come through the national collections call centre — usually about 45 days after an assessment with no payments. That agent's job is to arrange payment and encourage it within 30 days, but they are not assigned to the file and will not take collections action. One caution: an arrangement made with a call-centre agent is not binding on a collections officer who is later assigned, who is free to ignore it.
The arsenal: what a collections officer can do
To close files quickly, collectors use a formidable set of statutory powers:
- Director's liability assessments. Where a corporation cannot pay its trust amounts — GST/HST, CPP, and EI — the CRA can pierce the corporate veil and assess the directors personally for those debts, generally within two years of the person ceasing to be a director. See our page on director's liability.
- Non-arm's-length transfer assessments. Under section 160 of the Income Tax Act, a person who received property from a tax debtor for less than fair market value can be assessed for the benefit received. See our guide to the peril of family asset transfers.
- Garnishing wages. The CRA can require an employer — including the taxpayer's own corporation — to send a portion of wages directly to the agency, typically starting around 30% and rarely exceeding 50%.
- Requirements to Pay sent to customers. A Requirement to Pay (RTP) directs a third party who owes the taxpayer money — usually a customer — to remit those amounts to the CRA instead. A trade RTP can capture 100% of the receivable, and it also reveals the taxpayer's tax trouble to their own customers.
- Freezing bank accounts. An RTP issued to a bank branch freezes the account and forwards the balance to the CRA. It does not stop the taxpayer from opening a new account elsewhere — the CRA cannot go fishing for accounts it does not know about — but cash flow for the month is destroyed and payroll is often missed.
- Liens on property. Where the officer is not confident the debt will be paid in a reasonable time, a lien can be registered on the taxpayer's real estate, securing the CRA's position on any sale or refinance. The CRA will rarely force the sale of a primary residence, but it happens in extreme cases.
- Seizure and sale of assets. With a Federal Court certificate, the CRA can have a sheriff or bailiff attend and seize assets for sale at auction. This is the least commonly used power.
Director's liability and the "reasonable director" problem
Of all the powers, director's liability deserves a closer look because it reaches past the corporation into a person's own assets. When a collector hits a wall trying to collect a corporation's trust amounts — GST/HST, CPP, and EI — the next step is to assess the directors personally. These are amounts the business literally collected or withheld on the government's behalf, so the law treats directors as having a duty of care to ensure they are remitted. A director can be assessed within two years of last serving as a director, and only after the corporation's own ability to pay has been exhausted.
The statutory escape is the due-diligence defence: a director avoids liability by showing they exercised the degree of care, diligence, and skill that a reasonable director would have exercised in comparable circumstances. The problem in practice is how the CRA reads that standard. Faced with a director who used trust funds to pay the landlord and keep the business alive rather than remit the GST/HST, the agency almost always concludes the director should have paid the government first. But what reasonable director, knowing that non-payment of rent means immediate closure, would choose to remit the tax and let the business die? The CRA tends to apply the "reasonable director" test as if it were a "perfect director" test that no one can meet, and it effectively treats directors as guarantors of the debt — a stance for which it has been criticized by many Tax Court judges. The defences that do exist — the two-year limitation and genuine due diligence — are real but difficult, which makes contemporaneous records of the steps a director took especially valuable.
How a payment plan actually gets made
If a taxpayer cannot clear the debt in a reasonable period, they will need a payment plan — and getting one depends heavily on the officer's goodwill, which is in turn informed by the taxpayer's prior compliance. A broken promise in the past makes a favourable plan much harder to negotiate now.
The officer will ask for financial disclosure: completed income-and-expense and net-worth worksheets that show how much the taxpayer needs to keep to pay monthly bills, and what the CRA could seize or lien. Anything above the cost of living — the "surplus income" — is what the CRA will want each month. Some officers will go so far as to critique a taxpayer's lifestyle, pressing them to drive a cheaper car or eat cheaper food, all to drive down expenses, raise the monthly payment, and close the file sooner. For a business, the officer may also ask for three months of bank statements and an accounts-receivable listing.
Be very careful with the accounts-receivable listing. Once it is in the CRA's hands, a simple RTP to each customer can stop cash flow overnight and put the business in real danger. Businesses have died within weeks of an aggressive officer working through an A/R list. Similarly, before agreeing to any plan, an officer will often demand letters proving the taxpayer was refused a bank loan — to confirm no one else will finance the debt. Each formal loan application that is rejected damages the taxpayer's credit. A better approach is to ask the bank manager for a simple letter stating the bank will not extend credit at this time; with no formal application, there is no hit to the credit rating.
Interim plans, final plans, and "closers"
There are three kinds of payment plans: those agreed by the call centre, interim plans, and final plans. Final plans create finality and certainty, which is exactly why officers resist them — a binding, written final plan strips the officer of the ability to change terms, squeeze for more, or accelerate the debt if the taxpayer's circumstances improve. The realistic strategy is to hope for a final plan but be prepared to live with a series of six-month interim plans, renewed one after another, stretching repayment over years.
One more warning. A file left open too long gets passed from officer to officer until it reaches a "closer" — an officer who handles the worst files, with broad discretion and an aggressive mandate to close quickly and stop further debt. Once a closer is involved, things tend to go from bad to worse: within days, a closer can RTP all the receivables, freeze the bank accounts, seize equipment, and push the company toward bankruptcy. The key to avoiding that outcome is to keep communicating with the officer and to finance the debt by any other available means.
A final distinction worth remembering: trust debts — GST/HST and source deductions — are treated far more seriously than ordinary income tax debts. Objecting to a trust assessment does not stop collections, and officers pursue trust amounts more aggressively and earlier. When paying voluntarily, prioritize the trust debt. For the firm's approach to negotiating with collections, see our page on tax arrears negotiation, and our overview of taxpayer relief for interest-and-penalty reduction.
The collections chapter is, by some measure, the one taxpayers find most surprising. This guide draws on Dale Barrett's book "Victory Over the CRA", written for accountants who represent their clients in disputes with the Canada Revenue Agency.