14 September, 2025
Summary: Have you had a client tell you they didn’t receive the benefits you estimated they were entitled to when you prepared their return? This may be because the client owes money to a creditor, and the Canada Revenue Agency (CRA) is acting on the creditor’s behalf to recover the money.
Debts where the CRA may get involved include income tax arrears, overpayments of federal benefits, ineligible COVID-related support, monies owed to other federal departments and provincial or territorial governments, and monies owed because of a court order that has not been respected.
The debt may be explained in the notes accompanying the client’s Notice of Assessment. This debt will also be referred to in the client’s CRA account which you can access using “Represent A Client”. The nature of the debt will determine where it is referred to in the client’s CRA account.
Understanding the nature of the debt will help you in explaining to the client any discrepancy between your estimates of the client’s refund and benefits, and what the client gets from the CRA.
Have you had a client tell you they didn’t receive the benefits you estimated they were entitled to when you prepared their return? In some cases, they might be getting the benefits but just don’t realize it because they haven’t checked their bank account. But for other clients, they owe money to various creditors. And in certain instances, the Canada Revenue Agency (CRA) acts as a form of collection agency, withholding the client’s refund and possibly some of their benefits, and redirecting these to the client’s creditor. The client may not realize they owe this money or, if they do know about the debt, they may not realize the CRA has the legal authority to do this.
Below you will find several different kinds of debts a client could have where the CRA may get involved. I identify how the client acquired this debt, which creditors can make a claim, and how the CRA deals with these claims. In some of these cases, it is not clear what the CRA’s procedures are for dealing with what it calls “recovery actions”. In these instances, this is because the CRA likes to consider specific client circumstances.
This debt will usually be referenced in the client’s CRA account which you can using Represent A Client. This article provides information to help you explain to the client any discrepancy between your estimates of the client’s refund and benefits, and what the client gets from the CRA.
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Income tax arrears
When a volunteer prepares an income tax and benefit return for a client, the return contains the information on what the client should see in their Notice of Assessment (NoA). In particular, the software may calculate that the client is owed a refund for excessive income tax that was deducted by their employer. Or again, the client owes no income tax or only a small amount that needs to be paid.
But the NoA issued by the CRA may differ from the volunteer’s estimate in the return. It is helpful if the client can show the volunteer their NoA. That way, the volunteer will be able to see and explain any of the differences between the two.
If “CR” is indicated beside the number for the “Total payable minus Total credits”, this means in principle that the CRA owes the client money. The CR is usually made up of any one or more of the following: overpayment of income tax (usually because of deductions at source), excessive Canada Pension Plan contributions, excessive payments of Employment Insurance premiums, and the Canada Workers Benefits. (Some provincial or territorial credits may also appear here.) When the volunteer prepares the return, this is what may look like a refund. But this does not provide the full picture.
- If the return is being filed late (after the April 30 deadline) and the client owes the CRA money, the CRA will a charge a penalty for filing their return late. If the return is being filed very late (some years after the tax year of the return), the CRA will also charge interest on the money owed. The balance in the NoA will take these into account.
- If there is a “previous account balance” given and “DR” is indicated beside the number, this means the client has arrears that have not been paid from previous returns.
- The “final balance” (the bottom line) adds the balance from the assessment to the “previous account balance”. If CR is indicated beside the number, then the client will still receive a refund. If DR is indicated beside the number, then the client owes the CRA this money.
If the client does not understand the number for the arrears (DR) in the “previous account balance”, this can be explained in one of two ways.
In the ideal scenario, the client should produce their NoAs for the prior years, and the volunteer can piece together when the money was initially owed and how the debt accumulated over time. However, NoAs will not explicitly show any interest that has been charged between NoAs.
The second way is to use Represent a Client to log into the client’s CRA account and to look at the “Statement of Account” for income tax. This should show the amounts owing over time, including any interest charged between NoAs.
The “Statement of Account” will also show if any benefits have been withheld (not paid to the client) and applied against the client’s tax debt. For example, in the past the Canada Carbon Rebate was frequently withheld for this purpose. In this case, the Canada Carbon Rebate benefit notice to the client would have indicated this. The “Statement of Account” for the Canada Carbon Rebate in the client’s CRA account would equally show this.
What is unclear is which benefits the CRA might withhold to apply against a client’s tax arrears. In principle, the CRA could withhold the GST credit as well as some provincial or territorial benefits. But it seems to depend on the client’s circumstances. I have never heard of the Canada Child Benefit being withheld for this purpose. Other volunteers have told me they have seen cases of seniors with tax arrears who do not seem to have any benefits withheld by the CRA.
Overpayment of GST Credit, Canada Child Benefit and provincial or territorial benefits
The CRA does not usually withhold specific benefits to which a client is entitled unless it believes that the client is not eligible to claim them. The problem arises when a client has made a claim for a benefit and received the money from the CRA, but the CRA subsequently determines that the client was not eligible to claim the benefit. Now the client has a debt to the CRA which must be repaid.
If the client owes an overpayment of a provincial or territorial benefit that is administered by the CRA, any remaining provincial benefit may be withheld by the CRA to apply against this debt. Using Represent A Client, the volunteer can go into the client’s CRA account and look at their “Statement of Accounts”. There will be a statement of account for each benefit, and the volunteer can see which benefit payments are being withheld to pay off the debt.
It is rare that the CRA makes an overpayment of the Goods and Service Tax (GST)credit. However, the GST credit may be withheld by the CRA to apply against other debts. Using Represent A Client, the volunteer can go into the client’s CRA account and look at their “Statement of Account” for the GST credit to see which benefit payments are being withheld to pay off a debt.
If the client owes Canada Child Benefit (CCB) overpayments, it is rare for the CRA to withhold new CCB payments. But the CRA may withhold other benefits such as the GST credit to apply against this debt.
Ineligible COVID-related support
Volunteers will know of clients who claimed COVID-related support payments but which the CRA subsequently determined they were not eligible to receive. The client has a responsibility to repay these amounts but may not have established any repayment plan with the CRA.
These COVID debts do not appear on a client’s Notice of Assessment (NoA). Instead, the client will have received various CRA notices about this debt which will be listed in the Mail section of the client’s CRA account.
To date, the CRA has not charged any interest on these debts.
Furthermore, the CRA has taken no action to collect these debts by withholding NoA refunds or benefits to which the client is normally entitled.
The CRA would prefer that the client contact the CRA to establish a plan for repaying the debt. Repayment plans can be as modest as $10-20 per month, depending on the size of the debt.
Monies owed to other federal government departments and to provincial or territorial governments
Client debts include:
- Canada student loans from the Department of Employment and Social Development Canada
- Loans managed by the Department of Immigration, Refugees and Citizenship Canada on behalf of the International Organization for Migration, usually for the costs related to new permanent residents’ international travel to Canada
- Provincial or territorial student loans
- Provincial or territorial social assistance overpayments
- Court fines
These federal departments and provincial or territorial governments have notified the CRA where the client is not repaying the debt according to the terms of repayment.
The CRA is the first creditor to collect. What does this mean? In the client’s Notice of Assessment (NoA), the CRA will withhold any potential refund to apply against outstanding tax arrears (see above under “Income Tax Arrears”). If there is any refund left over after this, the “final balance” may show up as a credit (CR) but the bottom line will show that the client is not getting any of the refund as the CRA is withholding this amount and transferring it to the relevant government department.
This will be explained in the notes contained within the NoA. Additionally, using Represent A Client to access the client’s CRA account, the volunteer can find a reference (an “individual set-off notice”) on the “Overview” page regarding any claims made by other government departments.
Separate from any amount shown in the client’s NoA, the CRA may also withhold some of the client’s benefits for this purpose. If so, this will appear in the client’s “Statement of Account”; the volunteer will need to check each of the benefits. The specifics will depend on the client’s own circumstances.
For further information, see: Individual Refund Set-off Program – Canada.ca
Monies owed because of a court order
Client debts arising from a court order that has not been respected include:
- Child support
- Spousal support (alimony)
The provincial or territorial governments have notified the CRA of any claim backed by a court ordered family maintenance payment.
The CRA is the first creditor to collect. What does this mean? In the client’s Notice of Assessment (NoA), the CRA will withhold any potential refund to apply against outstanding tax arrears (see above under “Income Tax Arrears”). If there is any refund left over after this, the “final balance” may show up as a credit (CR) but the bottom line will show that the client is not getting any of the refund as the CRA is withholding this amount and transferring it to the relevant government department.
This will also be explained in the notes contained within the NoA. Additionally, using Represent A Client to access the client’s CRA account, the volunteer can find a reference (an individual set-off notice) on the “Overview” page regarding any claims made by other government departments.
Separate from any amount shown in the client’s NoA, the CRA may also withhold some of the client’s benefits for this purpose. If so, this will appear in the client’s “Statement of Account”; the volunteer will need to check each of the benefits. The specifics will depend on the client’s own circumstances.
For further information, see: Individual Refund Set-off Program – Canada.ca