As of May 2026, a CRA Requirement to Pay (RTP) notice legally forces your bank to freeze your corporate accounts immediately upon receipt. You typically have a narrow window of 15 to 30 days to negotiate a payment arrangement before those frozen funds are permanently seized and remitted to the CRA.
Discovering that the Canada Revenue Agency (CRA) has issued a Requirement to Pay (RTP) notice is one of the most stressful events an Ontario business owner can face. Whether your corporate headquarters is located in Ottawa, Hamilton, or London, the CRA possesses aggressive collection powers under the Excise Tax Act and the Income Tax Act. They do not need a court order to garnish your business income for unremitted Harmonized Sales Tax (HST) or employee payroll deductions.
This guide breaks down the urgent timeline a business faces when an RTP is issued. 📋 We will outline the step-by-step process of how these garnishments work, the immediate actions you must take to protect your cash flow, and how a tax lawyer can help negotiate a sustainable resolution with federal collection officers.
Step-by-Step Process for Responding to a CRA Requirement to Pay
When the CRA issues an RTP, they are executing a legal mechanism that redirects funds owed to you straight into the government’s hands. Unremitted payroll and HST are considered “trust funds,” meaning the government views this as money you collected on their behalf and wrongfully kept, which prompts swift and severe enforcement.
Step 1: Identifying the Scope of the Freeze
An RTP can be sent to anyone who owes your business money. Most commonly, the CRA sends the notice directly to your commercial bank, freezing your corporate checking and savings accounts instantly. However, they may also send RTPs to your major clients, legally forcing your accounts receivable (A/R) to be paid to the Receiver General of Canada instead of your company.
Step 2: Communicating with Your Bank and Third Parties
As soon as you realize an RTP has been issued, usually because a debit transaction bounces or payroll fails, you must contact your bank manager immediately. ⚠ The bank is legally obligated to comply with the CRA and cannot release the funds to you. You must determine the exact dollar amount frozen and the date the bank is scheduled to remit those funds to the government.
Step 3: Contacting the CRA to Halt Further Action
Do not ignore the CRA collections officer assigned to your file. You or your legal representative must contact them immediately to explain the situation. If the sudden freeze prevents you from paying employee wages or keeping the lights on, you must demonstrate severe financial hardship. A lawyer can sometimes negotiate a brief pause on the remittance while a formal proposal is drafted.
Step 4: Negotiating a Favourable Payment Arrangement
To lift the RTP, you generally must pay the arrears in full or enter into a legally binding payment arrangement. You will need to provide full financial disclosure, including current bank statements, income projections, and a list of corporate assets. The CRA wants assurance that you can maintain current tax obligations while paying down the historical debt over an agreed period, usually 6 to 12 months.
Step 5: Securing the Release of the Garnishment
Once a payment arrangement is signed and your first good-faith payment is processed, the collections officer will issue a formal release letter to your bank and clients. 📍 This document legally lifts the Requirement to Pay, unfreezing your accounts and allowing your business to resume normal cash flow operations. Maintaining perfect compliance moving forward is essential to prevent a second, more aggressive RTP.
How Much Does it Cost in Ontario?
Ignoring CRA arrears is incredibly expensive due to compounded interest and severe penalties. Below is a breakdown of the typical financial impacts your Ontario business might experience during a CRA collections action as of May 2026.
| Expense / Penalty | Estimated Cost (CAD) | Details |
|---|---|---|
| Failure to Remit Penalty (Payroll) | 10% to 20% of the amount due | Increases for repeat offences |
| Failure to File Penalty (HST) | 1% to 4% plus monthly additions | Based on unpaid tax balance |
| CRA Prescribed Interest Rate | 7% annually | Compounded daily on arrears (as of 2026) |
| NSF Fees from Bounced Cheques | $45 – $60 per transaction | Charged by your commercial bank |
| Tax Lawyer Representation | $350 – $750 per hour | To negotiate with CRA collections |
How Long Does the Process Take?
The timeline for a CRA garnishment moves incredibly fast. Once your bank receives the RTP, the account freeze is immediate. The bank typically holds the frozen funds in a suspense account for 15 to 30 days before remitting them to the Receiver General. This short window is your only opportunity to negotiate a release. If you successfully arrange a payment plan, the CRA can issue a release letter to your bank within 24 to 48 hours.
Frequently Asked Questions (FAQ)
Can the CRA take money meant for my employees’ wages?
Yes. The CRA has super-priority over standard business expenses, including employee wages. If an RTP is issued to your bank, the bank must freeze all available funds, even if it means your payroll cheques will bounce.
Can directors be held personally liable for a corporate tax debt?
Absolutely. Under both the Excise Tax Act and the Income Tax Act, corporate directors in Ontario can be held personally liable for unremitted HST and payroll deductions. The CRA can eventually issue an RTP against your personal bank accounts and wages.
Will filing for bankruptcy stop a CRA Requirement to Pay?
Filing a formal corporate restructuring plan (like a Division I Proposal or CCAA) or declaring bankruptcy initiates a “stay of proceedings,” which legally stops most CRA garnishments. You should consult a Licensed Insolvency Trustee to explore this option.
Can I just open a new bank account at a different bank?
Attempting to evade an RTP by opening a new account at a different institution is highly risky. The CRA continually monitors the banking system and will quickly locate the new account, issuing a fresh RTP and potentially flagging your file for tax evasion.
Do I need a tax lawyer to speak to the CRA?
While you can speak to collections officers yourself, it is generally recommended to use a tax lawyer or accountant. Professionals understand the CRA’s internal policy manuals and can negotiate payment terms that are realistic for your company without making legally damaging admissions.
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