The short version
- A tax debt is any amount owing to CRA after its due date: income tax, GST/HST, payroll deductions, benefit overpayments. Interest is charged daily, compounded, at the prescribed rate (7% for October to December 2026).
- CRA can keep your refunds and some benefit and credit payments to pay the debt, without asking.
- For an income tax assessment, CRA generally waits 90 days before legal collection action. After that it can garnish wages, take money from bank accounts, register charges on property and, in serious cases, seize assets.
- Your options: pay, set up a payment arrangement, dispute the amount if it's wrong, ask for relief from penalties and interest, or, for debts you can never pay, talk to a licensed insolvency trustee.
- CRA generally has 10 years to collect from the date of assessment, but payments and acknowledgments of the debt restart the clock.
CRA Tax Debt: Your Options
A tax debt is a bad loan with an unusually patient, unusually well-equipped lender. CRA doesn't need to sue you to take money from your bank account, it doesn't forget, and it charges interest on the interest. It is also, oddly, quite reasonable with people who call early and keep their word. The difference between those two experiences is mostly what you do in the first 90 days. Here's the map.
Where Tax Debts Come From
| Source | Common reason |
|---|---|
| Balance on your return | Not enough tax withheld, self-employment income, two jobs; see why do I owe tax? |
| Reassessment | A review, audit or matching slip added tax for an earlier year |
| Missed instalments | Instalment interest and penalties; see tax instalments |
| Benefit overpayments | Canada child benefit or GST/HST credit recalculated |
| GST/HST and payroll | Collected or withheld but not remitted. CRA treats these as held in trust, and directors can be personally liable |
What It Costs to Wait
Interest is charged from the due date at the prescribed rate, compounded daily. At 7%, a $20,000 balance grows by about $1,450 in a year, and that's before any penalties. The rate changes every quarter. Late-filing penalties are separate, and can be worse than the interest; see late filing penalties and late payment interest.
Owe CRA and not sure what to do first?
Tell the assistant what you owe, which years and taxes, and what you can afford each month. It explains your options in order: dispute, relief, arrangement or insolvency, and what CRA will expect.
What CRA Can Do
| Action | What happens |
|---|---|
| Offset | Your refunds and some benefit or credit payments are applied to the debt |
| Requirement to pay (garnishment) | Your employer, bank or clients must send CRA money they owe you; see CRA garnishment |
| Bank account | Money in your account can be taken under a requirement to pay; see CRA bank account freeze |
| Certificate and charge on property | The debt is registered in Federal Court, and a charge can be placed on your home or land |
| Seizure and sale | Rare for individuals, but possible for assets |
| Directors | For corporations, unremitted payroll deductions and GST/HST can be assessed against directors personally |
For income tax assessments, CRA generally can't take legal collection action for 90 days after the notice, and while an objection is open it generally holds off on the disputed amount. Payroll deductions, GST/HST and amounts at risk are exceptions.
Your Options, in Order
- Check the amount. Log in to My Account and match the balance to the notices. If it's wrong, file a notice of objection by the deadline.
- File every missing return. CRA may have estimated your tax higher than it really is, and an arrangement usually requires your filings to be current; see unfiled tax returns.
- Pay what you can, now. Every dollar stops interest on itself.
- Call or go online for a payment arrangement before collection action starts.
- Ask for relief from penalties and interest if illness, a disaster, CRA errors or hardship caused the problem.
- Consider insolvency if the debt can't realistically be paid. A licensed insolvency trustee can explain a consumer proposal or bankruptcy, which generally include tax debts.
How Long CRA Can Collect
CRA generally has 10 years from the date it assessed the debt to collect it. That clock restarts when you make a payment, sign a payment arrangement or otherwise acknowledge the debt in writing, and it pauses in some situations, such as while you live outside Canada. Waiting it out is rarely a real strategy.
Rules That Keep a Debt From Growing
- File on time even if you can't pay. The late-filing penalty is avoidable; the interest isn't.
- Call before the letter's date, not after the bank calls you.
- Don't promise more than you can pay. A broken arrangement is worse than a small one kept.
- Fix the cause: more withholding at work, instalments, or a separate tax account for self-employment income; see how much to save for taxes.
Anyone threatening arrest over a tax debt, or asking for gift cards or crypto, is not CRA. More on dealing with CRA is on the CRA guide.
CRA Tax Debt Questions
What happens if I owe CRA money and don’t pay?
Interest is charged daily, CRA keeps refunds and some benefit payments, and after the notice period it can garnish wages, take money from bank accounts and register charges on property.
How much interest does CRA charge on tax debt?
The prescribed rate, compounded daily. It is 7% a year for October to December 2026 and changes every quarter.
Can CRA take money from my bank account?
Yes. CRA can send a requirement to pay to your bank without going to court first. It generally sends notices beforehand, and for income tax assessments it usually waits 90 days after the notice.
Can I make payments to CRA?
Yes. CRA offers payment arrangements, online through My Account or by phone. Interest continues until the debt is paid.
Does tax debt go away after 10 years?
CRA generally has 10 years from the assessment to collect, but payments and written acknowledgments restart the period, so most debts do not simply expire.
Sources: CRA, IC98-1 Tax collections policies; Arrange to pay your debt over time; Prescribed interest rates, Q4 2026. Checked October 2026. The 10-year collection period and its restart rules are summarized from section 222 of the Income Tax Act as we understand it. The interest example is approximate. Which benefits CRA can offset varies by benefit.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.