Your card is declined, the bank tells you the CRA has taken the account, and nobody in that conversation can tell you what happens next. The instrument behind it is a requirement to pay, and understanding what it is makes the next few days considerably less frightening.
Key takeaways
- A requirement to pay is a written demand to a third party who holds your money, telling them to pay the CRA instead.
- It does not need a court order, which is why it can arrive without a hearing.
- You are not the one it is served on, so the bank may know before you do.
- Confirm the freeze is actually the CRA. Banks and private creditors can freeze accounts too, for entirely different reasons.
- The release comes from resolving the debt, most often through a payment arrangement.
What a requirement to pay actually is
Where you have an unpaid debt, the CRA can ask someone who owes you money, or who holds money for you, to send it to the CRA instead. The CRA names an employer and a financial institution as examples. The demand goes to them, not to you, and it creates an obligation on their side to comply.
This is the part that catches people. The document is served on your bank. Your bank then acts on it. You find out because your card stops working, which is why it feels arbitrary even when a warning was sent earlier.
First, confirm it is the CRA
Not every frozen account is a tax matter. A bank can restrict an account on its own initiative, and a creditor who has won a judgment can freeze one too. Before you phone the CRA and start negotiating a balance, ask your bank precisely what it is acting on. If it is a requirement to pay, ask for the date and the issuing office.
The routes out
| Route | When it fits | What it needs |
|---|---|---|
| Pay the balance | The funds exist somewhere the freeze does not reach | Nothing beyond payment |
| Payment arrangement | You cannot pay in full but can pay over time | Documented income, expenses, assets and liabilities |
| File the missing returns | Part of the balance is estimated for unfiled years | The actual returns, which frequently lower the amount |
| Show financial hardship | Paying it would leave you unable to meet basics | A full financial picture, supported |
| Dispute the assessment | The amount itself is wrong | The objection route, which is separate from collections |
A payment arrangement is the common answer, and the CRA builds it from what you can actually pay rather than what it would like. It expects documentation and an officer may verify it. Two conditions matter afterwards: the payments continue on the agreed dates, and future returns get filed on time.
What not to do
Moving money to a different institution the day after a freeze does not solve the underlying debt, and the CRA can issue more than one requirement to pay. The faster route is almost always the boring one, which is getting the filings current and the arrangement agreed. If the account froze because collections had been running for a while, the freeze is a stage in that process rather than the start of it.
Common questions
Can the CRA take money from my account without a court order?
The CRA can require a third party who holds money for you or owes you money, including a bank or an employer, to pay it to the CRA. That is the step people experience as a frozen account, and it does not begin with a court hearing. Separately the CRA can register a certificate in the Federal Court, which once registered has the same effect as a judgment of that court.
Is it definitely the CRA that froze my account?
Not necessarily, and this is worth five minutes before you act. A bank can restrict an account for its own reasons, and a private creditor can freeze one after winning a judgment. Ask your bank what it is acting on and get that in writing.
How do I get the account released?
By dealing with the debt behind it. A payment arrangement is the usual route, and the CRA works from documented ability to pay. Where part of the balance came from years that were never filed, filing the real returns often reduces the amount first.
Will the CRA warn me before this happens?
For most income tax debt the CRA gives a legal warning before proceeding. Amounts you withheld or collected for someone else, such as payroll deductions and GST/HST, are treated more urgently, and the notice of assessment can itself be the warning.
Can I still use my other accounts?
A requirement to pay is directed at a named third party. That does not mean the CRA is unaware of other accounts, and it can issue more than one. Treat it as a signal to resolve the debt rather than to move money around.
If your account has been frozen
We help owners get unfiled returns in and build the numbers a payment arrangement needs. Offices in Abbotsford, Langley and Brampton.
Sources: CRA, Garnishing your income and accounts, How to process a garnishment from the CRA, Information Circular IC98-1, Tax collections policies. General information only, not advice for your situation.