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My Bank Account Has Been Frozen by the CRA. Now What?

September 20, 2022

By: James BellManaging Director, Farber Tax Solutions, Senior Advisor, Farber Tax Law

It’s Friday afternoon and your bank account has just been frozen by the CRA. The shocking realization sends you scrambling for cash to meet daily living expenses and halting all your weekend plans as a result. You’re not alone. This situation is one that many taxpayers find themselves in.

Why is my bank account frozen?

If you have money owing to the CRA and have not been making voluntary payments, the CRA can take legal action to collect those funds or seize your assets.

When the CRA issues a legal notice called a Requirement to Pay, the CRA discloses your debt to a third party and demands payment from them. When it’s sent to a bank, it becomes a legal obligation to freeze your account and transfer all funds to the CRA. Any funds transferred into the bank account subsequently will also be claimed by the CRA until the outstanding balance is paid in full.

This situation becomes worse if you have been using your bank account for high-volume transactions such as running a business. Any direct deposits or cheques going into the account will be transferred to the CRA, squeezing your operating cashflows. If you used your account for savings, those funds will also be claimed to the extent of your outstanding balance.

All this is often done following a legal warning letter from the CRA. Once sent, they can freeze your account without further notice to maximize the number of funds they can capture and incentivize the taxpayer to commit to resolving their tax issue. 

How can I unfreeze my account?

Releasing your bank account from CRA is possible, but it’s often difficult. It usually involves some sort of payment, and potential financial disclosure relating to your ability to pay the full outstanding balance over a period of time. Paying the balance in full will be the fastest way to unfreeze your account and remove the Requirement to Pay. However, establishing a reasonable payment arrangement over time is a more reasonable alternative.

The second option is more favourable as it requires much less money upfront but is often difficult to negotiate. A frozen bank account gives the CRA leverage to dictate the terms of the payment arrangement. Fortunately, this scenario is very manageable with the right skill set and knowledge of both the Income Tax Act and the Excise Tax Act.

If you have had your bank account frozen and are dealing with a difficult CRA collector, it’s time to talk to a professional.

Our ex-CRA professionals with Farber Tax Solutions have first-hand experience with tax issues such as these to ensure your rights are fully protected and you get the best possible outcome. Contact us today for a free, no-obligation consultation to find out how we can help you.