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CRA Wage Garnishment

CRA wage garnishments can garnish up to 50% of your earnings. Other income, such as income generated from contract work, can be garnished up to 100%! There is hope to fight the CRA. Experienced tax dispute resolution experts can help combat and end CRA wage garnishments. Contact Farber Tax today!

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CRA Wage Garnishment


One of the reasons that it is so difficult to negotiate with the Canada Revenue Agency (CRA) is because the agency has very strong collection powers. Agents often use the threat of CRA enforcement action and collections activity during a negotiation. They know that they have the power to collect the money owed, one way or another, so they will not give you very much during a negotiation. One way that the CRA can collect taxes owed to it is through CRA garnishment.

If you owe the CRA money and do not pay it, the agency can demand that your income be sent directly to the agency to pay your tax debt. The CRA does not need a court order to start garnishing your wages and, in fact, it does not even need to warn you that a garnishment is about to happen.

Having your wages garnished by the CRA can create many serious problems for you. First and foremost, you could be left without enough income to afford your monthly living expenses. This can put a huge strain on your life.

Unfortunately, it can be incredibly difficult to have a CRA garnishment removed once the process has started.


CRA Garnishment Limits


The CRA can garnish your wages whether you are an employee who earns a salary, a subcontractor, or a self-employed individual. Once a garnishment is ordered, your employer or client has no choice but to comply. Not only does this hurt you financially, but it can damage your reputation. Employers and clients who are told to direct payments to the CRA will immediately become aware of your tax problem, which isn’t just embarrassing, but it can also negatively affect your career. For instance, if you have a job where you are expected to demonstrate financial responsibility, being served with a garnishment can significantly damage your reputation.


How Much Can the CRA Garnish?


If you are an employee and have taxes deducted at the source, a CRA garnishment can direct 50% of your income to your tax debt. As you can imagine, it becomes very difficult to afford your life expenses when half of your salary is taken away.

If you receive subcontractor income, the situation can be even more severe. In these cases, the agency can garnish up to 100% of your income.

The same is true for self-employed individuals. The CRA can send notices to your clients, requiring them to redirect all invoice payments to the agency instead of sending the money to you. Not only will this take away your income, but it will severely tarnish your reputation.


CRA Garnishment Rules


As mentioned, the CRA does not need to get a court order to garnish your wages. However, in most cases, the agency will send you a written warning that legal action will commence within 14 days if you do not pay your tax debt in full. However, the CRA does not legally have to provide a warning. It can begin garnishment actions without telling you in advance.

The CRA can send a legal notice to any third party (such as an employer) that it believes owes money or will owe money to a tax debtor. This notice is known as a Requirement to Pay and it can be sent when the CRA has been unable to collect on a tax debt or make a suitable arrangement with a taxpayer. The CRA will also send a copy of the requirement to the taxpayer, informing them of the situation.

A requirement to pay is a legal document and the receiver is obligated to comply with it. If the third party owes money to the individual in question (such as a salary or any other payment) it must send the amount due to the CRA right away. If the third party does not owe money to the tax debtor, it must keep the document and comply with it if it owes money in the future. The third party must send the CRA the money as requested unless the agency advises them in writing that the requirement to pay has been withdrawn.

A CRA requirement to pay ends when the third party no longer owes money to the taxpayer, when the total amount sent to the CRA equals the maximum amount shown on the requirement, when the third party receives written notice from the CRA stating that the requirement is no longer in effect, or when the requirement expires.

If someone does not comply with a requirement to pay, it can become liable for the tax debt owed to the CRA and the agency can take action to collect from the third party.


What is a CRA Payroll Garnishment Notice?


A CRA payroll garnishment notice is a requirement to pay document that is sent to an employer. Once an employer receives this notice, it must comply. Even if the employee no longer works for the employer, the employer must send the CRA any requested money that is still owed to the employee (such as their final pay).

If the employer is already sending some of the money owed to the taxpayer directly to another creditor, it must still comply with the requirement to pay.

In fact, the employer must even comply with the order even if they have received a phone call from a trustee stating that the taxpayer has filed for bankruptcy. The employer must honour the requirement to pay until it receives written notice that the taxpayer has filed an assignment in bankruptcy, a consumer proposal, or a notice of intention to file.


Stopping a CRA Garnishment


As you can see from the information stated above, a CRA garnishment is very difficult to stop. Once it is sent out, it must be complied with and the garnishment typically does not stop until the agency receives the money that is owed to it, or it makes an arrangement with the taxpayer.

However, negotiating with the CRA is very difficult. The agency will not reduce the amount owed and it will be very demanding when negotiating a payment plan. That is why it is critical to work with an experienced tax professional. If you believe that the CRA will soon begin to garnish your wages, or if a CRA garnishment has already begun, contact us right away. Our team will not only work to have the garnishment lifted as soon as possible, but we can work to favourably resolve your tax problem and work out a payment plan that you can afford. Please contact us today.


Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:

  • 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
  • 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
  • 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.