Requirement to pay (wage garnishment)

A buyer meets a requirement to pay when an employee’s wages are already being garnished, or when a notice turns up in the seller’s files. The closing-day payroll answer covers the wider payroll handover.

How it works

Under s.224(1), where the Minister knows or suspects that a person is, or will within one year be, liable to make a payment to a tax debtor, the Minister may in writing require that person to pay the money, in whole or in part, to the Receiver General on account of the tax debtor’s liability. Section 224(3) extends a requirement over periodic payments, such as remuneration. Under s.224(4), a person who fails to comply is liable to pay the Crown the amount that should have been paid.

What the CRA says an employer does

• The CRA says the employer must comply when it receives a notice for garnishment, unless the CRA says in writing that it has been withdrawn, and that the CRA sends a copy to the employee at the same time.
• The garnished wages still count as employment income on the T4, and the employer still withholds payroll deductions.
• The employer remits the amounts as the notice instructs.

Ask the seller for any garnishment notices and check who each is addressed to. Compare payroll transfer arrangements with the CRA.