Taxology – Episode 14: Understanding the Collections Process

CC: Welcome to Taxology, the official podcast of the Canada Revenue Agency. I'm your host, CC, and this episode is about the collections process. The word collections may seem scary, so we're going to talk about it.

The collections process happens when you owe the CRA money after doing your taxes, regardless of what that amount might be. It can also apply to other types of debt the CRA is responsible for recovering, including debts on behalf of other government departments. This could happen for several reasons, like life changes that affect your tax situation, a small tax filing error, or unexpected income like a paid bonus, among other things.

On this episode, we meet with Rose, a collections officer at the CRA, who's worked directly with taxpayers to help them understand the process and help them find a resolution. We'll walk through the typical path a taxpayer might take during this process and debunk misconceptions along the way.

Plus, Rose will give you tips on how to take proactive steps to pay your debts with the CRA and how to work with a collections officer to resolve them.

Even if you, a friend, or a family member aren't currently dealing with tax debt, this episode is still a great listen to understand how the process works. So, let's get to the helpful info and welcome our guest Rose, to the show.

Welcome to the show, Rose.

Rose: Good day, everyone. It's a pleasure for me to be here and to be part of this podcast.

CC: Tell us a little bit about you and your experience at CRA.

Rose: Yes, so I joined the CRA in November 2006. For 13 years, I held various positions as a collections officer at different levels.

CC: When would a taxpayer find themselves in the CRA's collections process?

Rose: Yes, you may find yourself in collections and often it can happen unexpectedly for some core reasons. For example, incorrect filing.

So if ever you claim a credit or a deduction that you are not eligible for and it gets reassessed by the CRA, you may owe money back.

Just to give you a more concrete example, your childcare expenses. Let's say you claimed them, but after review, your spouse is the one that was entitled to claim those childcare expenses. Once the reassessment is processed, you may have a balance to pay.

CC: Okay.

Rose: Also, you could receive some unexpected income. Let's say you receive a bonus, capital gain, or other taxable income without planning for the tax implications, you may receive a surprise tax bill.

A situation that we tend to see with students, for example, that have different part-time jobs – they may end up owing money if they don't have enough tax withheld from their paycheques.

Just to give you an example, let's say you work in a hospital on weekdays, and in a restaurant in the evening. You earn approximately $20,000 at your first job and $15,000 at the second one. In 2025, the basic personal amount, so that's the amount of income that is non-taxable, that amount was $16,129.

If you don't inform at least one of your employers, with the help of a TD1 form, that you have a second job, they might not withhold enough, if any, taxes. So when you complete your income tax return the following year, you might owe a significant amount.

CC: Where can I find the TD1 form?

Rose: To find the TD1 form, you may go on the Canada.ca website and type TD1 in the search box.

CC: And what if I'm self-employed?

Rose: Good question. If ever you're self-employed, you are responsible for calculating and remitting your own taxes.

If you don't make your regular instalment payments or if you underestimate your income, you may accumulate tax debt.

Also, life happens. There are events like divorce, job change, retirement, that can affect your tax situation and lead to unexpected debt.

We are aware that being in the collections process, it may seem scary at first, but really our goal is to replace fear with understanding, to empower you, the taxpayer, to take proactive steps to avoid falling into a perpetual collection cycle.

CC: Can you walk us through a typical path a taxpayer might experience in the whole collections process?

Rose: Absolutely.

Canadians have a legal and personal responsibility to pay taxes. We pay taxes to support the economic and social well-being of all Canadians.

After filing a tax return, the CRA issues a notice of assessment. If there is a balance owing, the taxpayer is informed of the amount due, including penalties and interest, if applicable.

From there, taxpayers have 90 days from the assessment date to file a notice of objection if they disagree with that amount. During this time, CRA may pause collection actions, but interest still accrues and increases at the prescribed rate.

If the taxpayer agrees with the amount owed, they should pay it in full. If taxpayers cannot pay in full, we will consider mutually satisfactory payment arrangements based on their financial situation. If the taxpayer doesn't pay the amount owed voluntarily, we may take legal action to collect the amount.

CC: Okay, so if we can't pay it in full, we might make some payment arrangements, like where I can pay it, like monthly, break it down?

Rose: Yes, absolutely. So, to take a payment arrangement, you can reach out to a collections officer, for example. And yes, it is possible to make payments, monthly instalment payments towards your tax debt. Taxpayers can easily set a payment arrangement through My Account.  You can use CRA My Payment or My Account portals. You can use your bank or your credit union, you can use Canada Post and with a third-party service provider. You can also go to canada.ca/payments to see all ways to pay.

CC: Do you have any real-life examples of collection situations you've seen?

Rose: Yes, absolutely. I remember this one individual that called us and she was retired and she ended up with multiple income from different sources. So, she was receiving her pension income and also working a job on the side to make ends meet. She was so nervous and she was afraid that we would go after everything that she owned.

So I started by reassuring her that being in collection, it's a collaborative effort. Let's work, let's discuss to find a solution to her tax debt.

After reviewing her income tax information on the screen, I realized that there was the same amount that was reported twice. That's a common situation that we see happen with some senior citizens' declarations. So they retired, they receive a pension from their previous employer, as well as the CPP. Sometimes a mistake is made and the income from their pension is reported on the wrong line, CPP.

When the Canada Revenue Agency goes through their return, they realize that there's an amount of pension that was not declared at the right line and they put it at the right line. Without deducting that amount from the CPP line.

So once I realized that mistake, I actually suggested the taxpayer to call the contact centre to have her income taxes adjusted accordingly.

I can tell you that taxpayer was relieved that not only we were not going to go after her assets, but she actually did not even owe the whole amount. Her income taxes did end up being adjusted and she paid her fair share of taxes.

CC: That’s such a relief. What a nice story!

Okay so how am I going to know that I even have a debt?

Rose: Yes, so as mentioned earlier, after filing a tax return, the CRA issues a notice of assessment. If ever there are adjustments that are needed on that initial assessment, there is a notice of reassessment that will be issued once the adjustments are completed.

If a balance is owed, you may receive a statement of account showing the balance with any payments made and interest payable since the issuance of the notice of assessment or notice of reassessment. If you have a debt and you have not confirmed arrangements to pay it, you may begin to receive legal warning letters.

CC: This sounds like a stressful and scary experience.

Rose: Yeah, taxpayers may be surprised to learn that working with a collections officer is intended to be a supportive experience actually, and it's there to help resolve their fiscal responsibilities.

A major misconception about the collections process is that once you're in it, you're in legal trouble or immediate risk of losing assets like your home or wages, etc. If you have a debt and have not confirmed arrangements to pay it, or if you don't make your scheduled payments on time, we may begin legal actions.

Before we start the legal actions, we will generally make a minimum of one attempt to give you a verbal legal warning over the phone, we will send at least one written legal warning letter.

However, if your business owes payroll or GST/HST remittance debt, we may begin legal actions right after you are notified of your debt. So in order to avoid legal actions and additional complications, taxpayers should respond to our phone call or letters as soon as possible.

CC: So you're going to give a lot of notice, but then if we still don't take action, then what might happen?

Rose: It is a possibility that at that point we start taking legal action, such as freezing bank accounts or having wages garnished. If you keep an open line of communication with the collections officer, you will avoid that sort of surprise.

CC: At what point does the CRA take legal action on a taxpayer?

Can you tell us what happens and how the resolution process works at this stage?

Rose: Sure. So, the Agency makes every effort to reach a mutually acceptable payment arrangement before proceeding with garnishment or other forms of legal action, such as the seizure of properties and assets. If you do not pay the amount owed voluntarily, we may take legal action to collect the amount.

Once we issue a requirement to pay or start other legal proceedings, we will usually not stop or withdraw these actions until the account is paid in full, or when it can be shown that the action is causing you financial hardship.

The best advice I can give you is really to contact the collections officer that is assigned to your file to discuss your situation and find a mutually satisfactory solution.

CC: Okay, so let’s say you have a debt, but you feel confident that you can pay the amount owing on your own like when it's a smaller balance. Can you just make the payments without talking to the CRA? What options would you have in that case?

Rose: Yes, you do have options in how you can pay your debts. You can use CRA My Payment or My Account portals. You can use your bank or your credit union, you can use Canada Post and with a third-party service provider.

You can also go to canada.ca/payments to see all ways to pay.

Canadians also have some flexibility in how long they can take to pay the amount owing, including paying the amount in one lump sum or over several months by using My Account portals, an automated TeleArrangement service, or making a payment arrangement directly with a collections officer.

Taxpayers can easily set a payment arrangement through My Account. If ever you don't have access to My Account or if the type of debt that you owe is not available online, or if you'd rather use a different payment method, you may contact the CRA by phone.

For your personal income tax debt, you may call our automated line from Monday to Friday from 7 am to 10 pm, Eastern Time, except on holidays, to make a payment arrangement.

If you wish to speak to an agent, the toll-free number to dial is available on your notice of assessment or reassessment.

In October 2025, the CRA launched a new service called Manage Balance. Taxpayers owing $1,000 or more for personal income tax or COVID-19 benefits debts will automatically be presented with the Manage Balance page when logging into My Account.

This service helps them stay on top of their debt by offering options like making full or partial payments, scheduling payment plans, connecting with a collections officer, or requesting a call back.

CC: Okay. So that's when I can resolve it by myself, but what if I really can't resolve the amount owing?

For example, like if the amount owing is way too large to manage without financial hardship, what steps could I take?

Rose: What you can do is contact a CRA collections officer to discuss the full situation with a human being.

So a collections officer can give you information on how to better prepare, such as calculate your ability to pay, how you might be able to pay it over time, find other ways to reduce or resolve your debt, and/or if they wish to make changes to an existing payment arrangement.

So as mentioned, we will consider mutually satisfactory payment arrangements. We will take a look into your ability to pay.

So, the collections officer, in order to determine that, may request supporting documentation as proof of your income, expenses, assets, as well as liabilities. A collections officer may verify the information that you provide before they accept a payment arrangement. Call us if ever your financial situation changes while your payment arrangement is ongoing.

CC: What are some examples where financial hardship conditions might apply?

Rose: It is possible to obtain debt relief under special circumstances. So, for example, you may request the CRA to cancel or waive penalties and interest, you have the inability to pay, or if you have financial hardship.

So, if, for example, there is death of a significant other or a loved one, serious illness, an accident, emotional distress, natural or human-made disaster, civil disturbances or disruptions in services, or any other extraordinary circumstances that affect you.

So, you may need to provide a detailed description of the event that occurred or of the situation, as well as all documents that may support your claim. For more details, you may consult our Canada.ca page or discuss your options with the collections officer.

CC: On my phone, I get texts all the time saying that the CRA is coming for me and I owe all sorts of money.

Rose: Yeah, I know that happens and it's really important to stress that the CRA will never use threatening language or request payments by e-transfer or text message. We will never ask for payment by gift cards or cryptocurrency either.

If a CRA collections officer is contacting you, they will always provide their name and their phone number. You can also consult canada.ca/bescamsmart to find ways to help protect your information.

CC: Okay, great. So, I'm not owing, I'm not going to go to jail, hopefully!

Rose: Absolutely not. If you receive that sort of call with threatening messaging, please know the CRA does not proceed that way.

CC: Rose, this has been a lot of information. Do you have any final tips for people who might be in the collections process?

Rose: Yes, I want to reiterate that being in collection is a deeply human experience. It's often marked by stress and anger, but with support and proactive steps, there are real options for you to resolve your debts.

 If ever you have a tax debt and you feel the need to speak to someone, do not hesitate to call us to explain your situation. Collections will work with you.

The Canada Revenue Agency is committed to administering Canada's tax laws in an impartial manner to ensure that our tax system continues to be fair and applies consistently to all Canadians.

Remember, there is also a lot of information that can be found on canada.ca/cra-collections, so don't hesitate to consult those pages.

CC: Great. And thank you for coming and joining us today.

Rose: My pleasure.

CC: Thanks again to our guest, Rose, for being on the show. We hope this episode has helped you understand the collections process and the steps you can take to resolve your situation if you owe the CRA money. Remember, there are always options available if you can't pay right away.

For more information, go to canada.ca/cra-collections. You can also follow us on Facebook, X, or Instagram @CanRevAgency and listen to all of our previous episodes to stay informed on all things taxes.

Thanks for listening. Until next time, I'm your host, CC. Stay safe and do your taxes.