Tax Debt Across the Border: Can the CRA Collect an IRS Debt, and Can the IRS Collect a CRA Debt?

A Canadian who moves to the US with an unpaid CRA balance, or an American who moves to Canada with an IRS debt, sometimes assumes the border ends the matter. It does not. Since 1995, Article XXVI A of the treaty has committed each country to collect the other's tax debts once they are finally determined, using the collecting country's own enforcement tools. The IRS will collect a CRA assessment against a US resident by levy and lien; the CRA will collect an IRS assessment against a Canadian resident by garnishment and seizure. The single exception protects a person who was a citizen of the collecting country when the debt arose, and it protects them only for that debt.

Full guide: Can the CRA Collect for the IRS — or the IRS for the CRA? Article XXVI A, the Citizenship Carve-Out, and What Cross-Border Debtors Should Actually Expect

Key takeaways

• Article XXVI A: each country agrees to accept the other's finally determined revenue claims for collection and to collect them as if they were its own, with the same powers and the same priority as its own claims.
• Finally determined: the claim must be beyond appeal in the country of origin (the assessment period and objection or appeal rights have run). A claim under objection or appeal cannot be sent for collection.
• The citizenship exception: a country is not required to collect a claim against a person who was its citizen when the claim arose. The CRA will not collect an IRS debt against a Canadian citizen for tax years when they were a Canadian citizen; the IRS will not collect a CRA debt against a US citizen for years when they were a US citizen. Permanent residents and non-citizens are not protected.
• Covered taxes: income taxes, and under the protocol, all taxes covered by the treaty plus interest, penalties, and collection costs.
• Limitation periods: the collecting country's own periods do not apply to the foreign claim; the originating country's do. The CRA's collection limitation period is generally ten years from the last collection action; the IRS's is ten years from assessment.
• Practical reach: the IRS can levy US wages, bank accounts, and Social Security for a CRA debt; the CRA can garnish Canadian wages, seize Canadian accounts, and intercept refunds and benefits for an IRS debt.

How the mechanism works

The country that assessed the tax (the applicant) sends the finally determined claim to the other country's competent authority (the CRA's collections branch or the IRS's international collection function) with a certification that the claim is final and the amount. The requested country then collects the claim as if it were its own tax: the IRS issues notices, files liens, and levies; the CRA issues requirements to pay, registers certificates in Federal Court, and garnishes. The taxpayer's rights to dispute the underlying claim are in the originating country only; the collecting country will not entertain challenges to the merits.

Amounts collected are remitted to the originating country. The collecting country does not add its own penalties, but the originating country's interest continues to accrue.

The citizenship exception

The exception is narrow and precise: the collecting country need not collect a claim against a person who was its citizen at the time the claim arose (the tax year, in most readings). A Canadian citizen living in Canada with an IRS debt from a year when they were a Canadian citizen is protected from CRA collection of that debt; the IRS's own collection powers do not reach into Canada (the IRS cannot levy a Canadian bank account directly). The protection is against the CRA acting as the IRS's collector, not against the IRS pursuing US-situs assets or the debt following the person if they return to the US.

A Canadian permanent resident who is not a citizen has no protection: the CRA will collect an IRS debt against them. A US citizen living in Canada with a CRA debt has protection from IRS collection in the US, but the CRA can collect in Canada directly, and if the person has assets in the US, the CRA can ask the IRS to collect against them only if the person was not a US citizen when the debt arose.

Dual citizens are protected in both countries for debts from years when they held the relevant citizenship.

What is not collected

Claims that are not finally determined; claims arising before the protocol's effective date (1995) in some readings; claims against citizens for the relevant years; and, under the treaty's general provisions, claims that would violate the collecting country's public policy. The exception for citizens is the one that matters in practice.

Limitation periods

The originating country's limitation period governs. The CRA generally has ten years from the date of a notice of assessment (extended by any collection action or acknowledgment) to collect; the IRS has ten years from assessment (extended by installment agreements, offers in compromise, bankruptcy, and periods outside the US). A person who leaves the US suspends the IRS's ten-year period while absent for six months or more, so the IRS clock does not run down during years in Canada.

Practical consequences

Canadian with a CRA debt moving to the US. The CRA can pursue Canadian assets directly (bank accounts, RRSPs by requirement to pay, Canadian real estate) and can ask the IRS to collect against US wages and accounts once the debt is final, unless the person was a US citizen for the relevant years. The debt follows the move.

American with an IRS debt moving to Canada. The IRS can pursue US assets directly and can ask the CRA to collect in Canada unless the person was a Canadian citizen for the relevant years. A US citizen who becomes a Canadian citizen after the debt arose is not protected for the earlier years. The IRS also revokes or denies passports for seriously delinquent debts (over about $66,000), which affects a US citizen abroad.

Dual citizen. Protected in each country for years of that citizenship; the originating country's direct powers over assets in its own territory remain.

Refunds and benefits. The CRA intercepts Canadian refunds and certain benefits for an IRS debt it has accepted for collection; the IRS offsets US refunds for a CRA debt.

Resolving it

The dispute, if any, must be pursued in the originating country (an objection or appeal to the CRA, or an IRS appeal or Tax Court petition) before the claim is final. Once final, payment arrangements are negotiated with the originating country (a CRA payment arrangement; an IRS installment agreement or offer in compromise), and the collecting country holds its enforcement while the arrangement is honoured. Voluntary disclosure programs address unfiled years before assessment.

Worked example

A Toronto-born Canadian citizen worked in Chicago from 2015 to 2022 on an H-1B, under-reported income in 2019 and 2020, was assessed $90,000 by the IRS in 2024 after returning to Toronto, and did not appeal.

• Finality. The assessment is final after the appeal period; the IRS can request CRA collection.
• Citizenship exception. He was a Canadian citizen in 2019 and 2020; the CRA is not required to collect the IRS claim against him. The IRS cannot levy his Canadian accounts directly.
• IRS reach. Any US assets (a US bank account, a 401(k)) are subject to IRS levy; the IRS ten-year period is suspended while he is outside the US; a return to the US revives full exposure; passport consequences do not apply (he is not a US citizen).
• Contrast. If he had been a US permanent resident who is not a Canadian citizen, the CRA would collect the $90,000 in Toronto by garnishment and seizure.

Official sources

"The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in paragraph 9, together with interest, costs, additions to such taxes and civil penalties." However, "No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that (a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State." — Canada-United States Tax Convention, Article XXVI A, https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

The IRS explains that under mutual collection assistance provisions in certain tax treaties, including the treaty with Canada, each country may collect the other's finally determined tax claims. — Internal Revenue Service, Publication 597, Information on the United States-Canada Income Tax Treaty, https://www.irs.gov/publications/p597

Practitioner note

The border does not end a tax debt, and the citizenship exception is narrower than clients hope: it protects a person from the other country acting as collector, for the years of their citizenship, and nothing else. We tell clients with an open assessment on one side to resolve it before moving, because once it is final and they have crossed, the other country's collector is working the file.

See also: Planning a move? Start with the Canada-to-US tax checklist and browse every corridor by city, province, and state.

Next step

Fairlight prepares the cross-border collection exposure analysis, the objection or appeal in the originating country, and the payment arrangement negotiation. See cross-border pricing or book a call.