The Canada Revenue Agency requests that some Canadians pay their income tax by installments through the year.
The majority of Canadians don’t have to make quarterly tax installment payments toward their income taxes because their employers deduct sufficient tax at source throughout the year to cover their tax bill.
But those who have sources of taxable income outside of regular employment — which can include freelance income, income from investments, or withdrawals from RRIFs — often have insufficient (or no) tax withheld though the year, and as a result owe tax when they file their returns.
CRA requests quarterly income tax installments if your income tax assessment shows an amount owing of over $3,000 for any two of three consecutive years.
When to pay tax installments:
Tax installments are due four times per year: March 15, June 15, September 15, and December 15.
How much to pay
You installment payments must total the lesser of:
- your tax owing for the year, or
- what CRA requested of you in their request letter
If you don’t meet at least one of these criteria, an interest charge will be added to your tax bill.
The requested tax installment payment is always equal to 1/4 of the tax owing at the end of the previous year. So for example if your last income tax bill came to $3,600, the Canada Revenue Agency will request four tax installment payments of $900 each.
However, the very first time you’re asked for installments, those requested installments may actually be higher than usual. The first year you’re requested to pay, you won’t be notified until late in the summer. At that point there are fewer installment deadlines left for the year. Consequently CRA may apportion the total amount over the three or fewer remaining deadlines available.
Do I have to pay installments? What happens if I don’t pay?
Generally, if you owe tax at the end of the year you’ll pay interest on the unpaid tax installment(s). The interest will be applied retroactively to the due date of the missed payment(s).
Video: What Happens If You Don’t Pay Tax Installments?
CRA’s interest rate is set every calendar quarter. The interest is the only consequence of not paying installments, so consider your own cash flow and the costs when deciding whether to pay or not to pay. You’re not in trouble — and you’re not a bad person! — if you decide to skip your installments and just pay the full amount plus interest after you file your tax return.
See CRA’s current and historical interest rates here.
What if the requested tax installments total more than I owe?
If your tax instalments through the year total more than your final tax bill for that year, the excess will be refunded or credited to your account.
What if the requested tax installments total less than I owe?
If your income is higher this year, you may have a higher tax bill than your installments can cover. That does not mean you need to increase your installment payments (unless you want to). CRA won’t charge you interest for whatever additional tax you owe, so long as you paid the requested amounts.
You’re only responsible for paying the lesser of a) what you owe, or b) what CRA requested of you.
To learn more, check out CRA’s pamphlet on Tax Instalment Payments here.
I always pay my income tax when I file and would prefer to not to pay instalments. I prefer not to have to pay instalment payments.
Then don’t! Just pay later with interest. In the long run it makes no difference to CRA.
Income tax is technically owed when your income is earned, so if you don’t pay while you earn (either by having an employer withhold tax and remit it on your behalf, or by paying instalments yourself), you owe later on. So if you earn the money in August, but don’t pay the tax until the following June, by withholding what’s owed you have essentially borrowed money from the government. CRA provides a grace period (to April 30 of the following year) if you don’t owe much, but after that it’s just like any other loan. And just like mortgages, credit cards, and lines of credit, if you borrow, you pay interest.
This sounds criminal to me….never late paying tax bill but still get shafted by government, requesting money I don’t have….
It’s the same old dilemma: everyone loves roads, bridges and hospitals, but everyone hates paying tax 🙂
Yes, setting aside some of your income to pay the tax on it is a pain, but I’m not sure how it’s criminal.
Not at all although I understand where you come from. Let’s face it, if you make more with your money during a given period than what they charge in interests, what’s the problem? But yes, you are paying taxes to an organized syndicate. Taxes were initially charged to support the war effort but when politicians realized that all that money could be used, well, they decided that we had to pay for the privilege of being Canadians. The net effect over the years is that government took money away from religious non taxable organizations. So what you don’t pay to your church, you now pay to another kind of con artists.
As a Canadian, I mostly assume that the water from my tap is drinkable. I assume that the ingredients shown on labels are accurate. I assume that my child will be taught to read and that if I break a leg or need a heart transplant, I’ll get what I need. All these certainties come to us courtesy of a network of regulatory bodies and laws that require tax money to run. And regardless of the history of our Canadian tax system, tax has existed literally for millennia, because organized civilization has ALWAYS cost money to run. It didn’t start with the war.
Do I still have to take my income tax slips to H&R block if I have received installments slips for 2021? They will charge me to look at my T4’s and then I still have to pay the installment amount.
Hi Doreen. You certainly don’t have to take your slips to H&R Block. You can take them to us here at Personal Tax Advisors instead! 🙂
However I’m afraid I don’t understand your question. Paying instalments (estimated tax amounts) and filing income tax returns (calculating actual tax owing) are separate steps in the income tax process. If you have paid instalments, you may still want/need to file your taxes in order to receive any tax credits you may be entitled to, get refunded any overpayments, or calculate/pay your additional tax if your instalments aren’t sufficient to pay tax.
I don’t like to pay on quarterly instalments, but pay in full at the time of filing my tax return. Do I still have pay interest when I pay in full.
If your tax owing exceeds $3,000 for the year, then yes. Interest is payable retroactively to the date of the missed instalment(s).
Im confused about this whole thing. I will be starting as self employed sole proprietor here soon. I will be using the Canada.ca website to calculate how much federal / provincial and CPP I will need to pay and put it a bank account.
Can I pay my taxes that I have acquired at tax time. Or do I pay that in instalments OR do I pay the taxes that I acquired at tax time and if I owe more than the 3000 I pay than in instalments.
I’ve never been self employed before so this is all new to me and I want to ensure I do it right. I don’t want to be owing thousands and thousands later on.
Hi Clynne,
You don’t have to pay by instalments until you have a track record of owing more than $3,000 per year. By a track record, I mean owing that much in tax for two years out of any 3-year period. Until then, you can just set money aside and plan to pay when you file your taxes.
As to how much to set aside, we usually recommend you start with 20-25% of whatever you bill. There’s no way to know exactly how much you’ll owe, since your business expenses, other sources of income, and various tax credits come into play to determine that. But for most service-based businesses, 20-25% is a safe bet.
Can I appeal the amount of the monthly instalments? Because of an vastly inflated one-time amount of income last year for which I have paid the taxes in full, my quarterly instalments for September and December are being based on that amount and it will be quite a strain for me to pay them on top of what I already paid in income tax. The extra money that I received from the release of my dead husband’s investment is meant for his children, not for me, but I now find myself in this huge mess. I’ve lost my OAS and now must come up with another huge amount of money (by going into debt) in order to pay these instalments. Dos CRA pay any attention to or respond to an appeal based on this kind of information? Thank you so much for your website and your help.
As mentioned in the article, all you need to do to avoid interest charges is to pay the lesser of what you really owe, or what CRA is asking for. In other words, you’re free to make an estimate of your actual tax owing based on your changed circumstances (you may use a previous, more ‘average’ year as your basis for your estimate). Even if you’re wrong and you underestimate the amount required, the only real consequence is some interest.
Note that CRA’s interest is lower than just about every other kind of borrowing, so never go into debt to pay CRA, unless you can borrow at less than their current interest rate!
If one encounters a large capital gain (6 figures) but has not been required to pay by installments previously, should any tax be prepaid? Or should I just wait and pay by April?
You can do it either way – by prepaying so you don’t have to worry about it later, or by waiting. The main thing is, if you have not previously been required to pay instalments, you won’t pay any interest if you wait until the following April 30 to pay. By holding off on prepaying the tax, you could look at it as having a brief, interest-free loan. Beyond that, it’s just a matter of how you like to manage your cash flow.
Can I pay the total of all instalments in one shot to avoid the hassle of having 4 transactions ?
Absolutely. If you pay your whole tax bill by June 15, you can’t be charged for late payments!
In here I keep reading that when you don’t pay by instalments its like a loan. Does that mean that I can deliberately not pay by instalments-borrow, and use that tax money to grow my investments?
The tax is owing as soon as you earn the money. If you don’t pay the installments it’s considered to be a delayed payment, yes, and there’s interest on that. So you definitely could choose to treat it that way: as a loan you use to invest. However, if your return on investments net of tax (remember that any non-registered investment income is taxable!) does NOT exceed the interest rate, it’s not a win for you in the long run. (Also: unlike actual loans for investments, you can’t deduct CRA’s installment interest as a carrying charge to reduce tax.) So make sure you’ve looked at all the angles before you choose this route.
Hi,
Any excess tax I owe is always from capital gains and dividend income from stocks, bonds etc. Since I usually do not know what that amount will be until December I tend to pre pay the amount owing at that time. I always have the option of tax loss selling to adjust my total.
For the past three years I have never paid more than $3000 after my return was filed but the CRA continues to ask for installment payments as if my returns will continue year after year and last year I was charged interest when I was a month late on one payment. I have never been charged interest before for not paying an installment in full.
I do not expect the same investment return this year but fear the CRA will increase my installment payments based on last year’s investment income and charge me interest if I do not pay them.
Has anything changed over the past few years regarding installment payments because the rules you list do not seem to apply any longer or is my case unique?
Thanks.
Hi Frank,
The requested installments are always based on the previous year’s tax filing. So if your investments go down one year, the installments requested the next year will reflect that. The tax figure they’re basing this on is not what you owe at the end of the year, but what you would have owed had you not paid installments. For example, say you paid $3,000 in instalments and when the return was filed you still owed an additional $1,000. Total tax installments plus additional tax comes to $4,000, so the following set of required installments will be $1,000 x 4. If you know your income has dropped, you can estimate your tax owing and just pay that. If you get it right (or overshoot), you won’t pay interest on missed installments.
What different between income tax instalment and gst/hst instalment ? Will I receive the gst/ hst instalment slip from CRA ? And when? Thank you.
Income tax and GST/HST instalments are made to completely separate departments of CRA. You will receive ‘suggested’ income tax instalment payment notices, but you will NOT receive notices regarding GST/HST instalments. We have an article specifically about GST/HST instalments here.
I received a second alert from CRA as follows: Due March 15, 2022 for $2090.00 and Due June 15 for $2090. How do I claim this amount back when I submit my 2022 income tax return? Please advise…Thanks, Nazeer Junus
Hi Nazeer. You don’t really have to worry about it. Instalments made should be reported on line 47600 of your income tax return but you can estimate it or leave it blank and it won’t matter in the end. CRA keeps track of all the instalments you’ve paid for a given year and will correct line 47600 for you. Regardless of what you report (or don’t report) there, your Notice of Assessment (NOA) will reflect your actual tax owing (or refund) based on the correct instalment amounts paid.
I’m an employee and not self employed or business owner, but CRA wrote me and asking me to pay tax installment by 2022. Is this thing is for self employed or business owners only or employees included, like me?
Hi Robert. Being asked for instalments isn’t directly related to being an employee or self-employed. It’s related to the pattern of tax owing that has been established on your account over the past few years. If when you filed a return you owed over $3,000 per year (or would have, if you hadn’t paid that year’s instalment), and if that condition existed for two out of the past three consecutive years, CRA will assume the pattern is likely to continue and will request instalments.
If this is the case and you’re required to pay instalments every year despite being an employee and having tax withheld at source, it means your employer(s) aren’t withholding enough tax. Properly calculated tax withholdings should always be enough either produce a refund, or a very small tax bill that doesn’t require instalment payments. If that’s not happening you need to talk to payroll and get them to withhold the correct amounts.
BTW if you have more than one employer, you may need to inform one of them that you have another T4 coming from another employer so they can increase withholdings appropriately. People with more than one employer often suffer from a left-hand-doesn’t-know-what-the-right-hand-is-doing situation that causes withholdings to be too low every year.
If I’m required to pay installments but I know my income is going to be significantly less(50%) this year than last year. Do I still have to pay?
it’s significantly less because it was capital gains income from a rental property I sold.
Hi Jae. You can go ahead and pay only 50% of the requested instalments, if you’re certain your tax bill is going to be 50% lower. Remember that while the instalment amounts that are requested are based on the prior-year’s tax return, the interest on ‘missed’ instalments is based on the amount you actually owe for the current year. What you want to do with your instalments is meet your obligations. When the year is over and the tax return is filed, the amount of instalments actually owed is the lesser of what you’ve been asked to pay, and what you really end up owing.
Hi! Thank you for this article, it’s very helpful.
I am wondering if you’ve already paid at least one instalment (I paid Jan + March), does that mean that I need to continue paying the instalments for the rest of the year, even if I’ve since realized it doesn’t really apply to me anymore (I previously was self-employed in 2021, but for this entire year I have been an employee and they already deduct tax from my payslips instead, so I don’t believe I will owe over $3000).
No, you don’t have to continue, though you can choose to if you like. Any amounts you paid (or pay) into instalments will be deducted from your tax liability when you file your taxes. If your instalments exceed the tax you owe, you’ll get a refund.
If we failed to pay this instalment on time, would CRA charge a penalty and interest?
There’s no penalty, only interest.
I just wanted to say thank you so much for writing this article and even responding to the comments year after year. This has really helped myself and many self employed family and friends avoid an undue amount of stress.
For people who owe more than $3000 this year but did not have an amount owing greater than $3000 for 2 of the 3 past years, does the CRA forgive the interest, or do they automatically add it on to the amount owing? Either way, we have no choice but to pay it as a lump sum for this year, yes?
I do wonder, why does the CRA only request instalment payments when your amount owing is greater than the threshold for TWO years in a row? Is the “2 out of 3 consecutive years” condition essentially where they start guessing that owing an excess will be a regular occurrence for this person going forward?
Thank you again for this clear resource and for the incredibly sound answers to all the questions over the years.
Kevin M.
Hi Kevin. You’re very welcome!
Until you owe $3,000+ for two out of three years, you don’t have to pay installments and no interest applies. There’s no special obligation until you’ve crossed that two-out-of-three-consecutive-years threshold. AFTER that happens, if the tax is income tax, you’ll get a letter from CRA regarding installments with suggested amounts, and if you don’t pay them the interest applies. If the tax is GST/HST (i.e., if you’re a business owner registered to charge, collect and remit GST/HST), they usually don’t send a warning and expect you to just know.
Before you’ve crossed that threshold, there’s nothing you need to calculate, guess, assume, or do.
HI,I have to pay installment taxes to the CRA and revenu Quebec, but my income comes from trading. I don’t know how much I’ll make ,if any, till end of year. How do I proceed ???
Hi Gino. You don’t have to know how much you’ll make. If you want to avoid paying any interest to CRA (i.e., pay the required/requested installments) just pay the amounts they’ve suggested in their notice. If it turns out to be too much, you’ll have the excess refunded to you when you file your return. If it’s not enough, you’ll have to top up but CRA will not charge interest, because you paid what they asked for.
Alternatively you could just choose not to pay the installments, go through the year, file your return and find out how much (if any) you owe at that point. However, if it turns out that you owe, CRA will apply interest retroactively because you didn’t make the installment payments during the year.
Why wouldn’t statement of Old Age Security Pension and statement of CPP pensions send T4 AOS and T4A(P) for the taxation year? Should they show income tax deductions for these two pension income. Should this be the case then there is not need to pay by the new compulsory instalment. Every year I get T4A tax slip for superannuation; T4RIF for Registered Retirement Fund; T5 Statement Investment Income; etc… and none from AOS and CPP pensions deductions tax slips. Both AOS and CPP show only taxable benefits. As a pensioner, I find paying by instalment prior to the taxation year unnecessary extra work. Please look into this and see if AOS and CPP income be treated like any other pensionable income for the T$As.
HI Nazeer, The T4(P) slip and T4(OAS) slip reflecting CPP and OAS received do indeed have a place for income tax withheld. If it’s empty, then no tax was withheld. If you would like tax to be withheld on these amounts, perhaps so as to not have to make tax payments later, you need to arrange that with Service Canada, the arm of the government that manages these kinds of payments. You can call them at 1-800-O-CANADA (1-800-622-6232).
I always thought that married couples had to file taxes jointly in Canada, but after reading this post about “Can married couples file taxes separately in Canada?” I learned that they can file separately. It’s great to know that there are options available for couples who want to manage their finances independently.”
“Married Filing Jointly” is an American type of tax filing. In Canada everyone files their own return. However, married or common-law couples must note their marital status on the return, and report their partners’ net income in the indicated place on their return. This reporting doesn’t trigger tax for the partner (their partner’s own return does that) but it helps CRA calculate household income for the purpose of determining eligibility for certain credits linked to income.
I have a seasonal business and no income until April/may. But government wants installment sooner…..not fair. Tax payments before you make money
Yes, that’s unfortunate. However you could stretch out your installment payments so that this year’s payments finish off early next year. No need to pay your whole tax burden between May and December. Why not start in May, finish the following March, and repeat next year?
Thanks, much appreciated for the valuable information.
What if this year I’m transitioning from self-employed to billing under my corporation which will pay me dividends. I marked last year as last year of business when I filed my personal taxes. Will I need to continue paying instalments this year? I will still owe some taxes next year due to the dividend income from the corp. thank you.
If you know you won’t owe any personal taxes for the current tax year, you can just ignore the installments. If you’re right, there will be no interest or other repercussions. However if you’re wrong you may end up paying interest on the missed installments.
In 2022 I cancelled a life insurance policy and received a significant payment of the cash surrender value. This payment has created a large tax liability. It has also cremated a significant series of instalment payments. As this large payment was one time is it necessary to pay the required installment payments. Thanks
If it was a one-time event and you normally don’t owe tax, you should be able to ignore the installment payments. If you’re right and you owe no or very little tax, there will be no interest or other repercussions for not paying the installments. But if you do owe significant tax ($3,000 or more), you may have to pay interest on the missed installments. So skip them if you’re very confident that you won’t owe tax again, or pay (small) installments if you want to play it safe.
I paid $4,000 in tax instalments in 2022–though they were asking for more than that. I then paid another $2,000 in February, 2023. Now the auto fill on my tax return shows only $4,000 having been paid in instalments. Do 2023 payments not count toward 2022 taxes?
The payment made early in 2023 may have been directed into an installment account for the 2023 tax year. After you file your return you can call CRA and ask them to move the money from the 2023 account over so it can be applied to 2022. They’ll do it retroactively, meaning they’ll back out any interest on the amount that accrues between April 30 and your call to move it over. (Meaning: there’s no rush to do this, so long as the money was in CRA’s hands — even if it was misallocated — before April 30.)
Thank you for a very clear reply.
I’m commenting on this answer given here: “Hi Gino. You don’t have to know how much you’ll make. If you want to avoid paying any interest to CRA (i.e., pay the required/requested installments) just pay the amounts they’ve suggested in their notice. If it turns out to be too much, you’ll have the excess refunded to you when you file your return. If it’s not enough, you’ll have to top up but CRA will not charge interest, because you paid what they asked for.
Alternatively you could just choose not to pay the installments, go through the year, file your return and find out how much (if any) you owe at that point. However, if it turns out that you owe, CRA will apply interest retroactively because you didn’t make the installment payments during the year.”
How would the interest be calculated? For example…. if you did not pay 3 installments, but then paid a big lump sum at the end of the calendar year. At tax time next April, would CRA go back and add interest for the first 3/4’s of the year since no installment was made?
CRA will back-calculate what your installments should have been, based on the current tax bill. They’ll split them into four equal payments, due retroactively on the four installment payment deadline dates. Each missed payment accrues interest back-dated to the date on which it was due. So your first payment incurs approximately 1 year’s interest; the second payment incurs about 8 months’ interest, the third, 4 months’ interest.
I have been self employed for the last 9 years. I have always received letters from CRA telling me that I need to make instalment payments or else I could face interest and penalties. I asked about it the first time I received the letters and they told me that they can’t force me to make instalment payments, and that I would not likely be charged interest. So I never worried about those letters I kept getting every year and I have been writing them a cheque for approximately $10,000 every year at tax time and my wife has been receiving refunds of $1500-$2500 each year. This year I paid taxes of about $12,700 and my wife received a refund of $2300. But when I look online at the NOA it shows that I have to pay an additional $545 in interest and arrears. Did something change to make this year the year I finally have to pay?
Without knowing your particular situation, I don’t know. First thing I’d do is go back to the prior-year Notices of Assessment to confirm that this is indeed the first year you owed interest. If it really is, call CRA and ask for an explanation (though in the situation you describe, I would have expected you to owe interest every single year).
I am an employee of my own Ltd company and pay income taxes off each cheque. I am also T5’d for my December 2022 YE in February 2023 so now I owe more taxes. CRA has requested installment payments from me based on the total taxes owed. For the 2022 tax year they wanted $40K in installments, which I know my tax balance would not be that high so I sent in a one time payment on March 14, 2023 for the 2022 installment account. I actually overpaid by $5K. however CRA deducted $369. off my refund as I didn’t make the regular installments. My bone about this is that to me, # 1. I have never not paid my tax balance in full on or before the due date no matter ho9w much is owed. If I paid the full amount, why is CRA allowed to charge me interest. Do I have any recourse in this as in actuality my earned income would not be until the year end was done and T5’d for therefore I would have paid enough in taxes off my regular wages
Timing matters, because that’s what interest is: the cost of taking time to pay. The longer you take, the more you pay. If you had made the one-time payment around the time your FIRST installment was due, they wouldn’t have charged interest. Because you made them wait, you owed interest on the amount that should have been paid in that first installment, retroactively to when the installment was due.
If I have income that varies from year to year, when after tax filing does CRA change its installment calculation? I have been paying by installments for several years but last year my income was higher so more was owing when I filed. My notice for the March and June installments is based on 2021, so when the August notice is sent out will I owe 75% of my (higher) 2022 tax balance by September 15? Or do they expect me to raise my installment amounts for March and June and will I owe interest despite what the notice said (eg if I use their calculation sheet and divide my estimated 2023 taxes by 4?)
Thanks for answering all our varied questions!
If you have been keeping up with instalments, you will not owe 75% in September. Instead, your quarterly payments going forward will simply be adjusted to fit your prior-year tax bill, up or down.
For 2022 I had to pay $4900 taxes and CRA asked me to pay $12000 in installments. On 2023 I estimated that I have to pay about $4000 in taxes and CRA asked for about $14000 installments. I wonder why???
This doesn’t sound right. Installments are ALWAYS based on the amount owed in the previous year (including amounts paid via instalments). I.e., if you really only owed $4,900 at the end of the year, total instalments would come to $4,900. However, if you were paying $8k in instalments and still owed an additional $4,900 at the end, they’d increase your instalment requirements to $12,900 for the following year.
I have had to pay taxes more than $3000 for the last 2 years 2021 and 2022 (self employed) and I have received remittance letter for first time. My situation has changed completely this year 2023 and I am now a full time employee and have the appropriate tax deducted from my pay. Can I in this case simply ignore these payments since I know enough tax is now being deducted?
Yes, you can ignore it if you’re fairly sure you won’t owe over $3k in tax. If you’re right (and you owe less than $3,000 next spring), nothing happens. If you’re wrong, you’ll pay interest on the amount you owe.
This is a bit disappointing, that the CRA can notify me in August that they want me to pay $5000 in September and again in December. I allocate money each month into a tax account (that earns ME interest) so I have enough to pay my taxes on April 30. They are essentially babysitting me here. Not necessary, I will have my tax money in April as I always do. What a joke. Now I have to pay them interest because they want to micromanage my money? It doesn’t belong to them until April 30 next year.
You’re being very smart, earning interest on your money for as long as you can. The thing is, that money is owed as tax already (though they give you a break if you owe less than $3,000/year), so the government also wants to be smart and earn that interest themselves. It’s no different from paying your electricity bill. The bill is due at the end of the month. If you wait until next spring to pay it, you’ll have to pay the electricity company interest.
How come the government can ask me to pay taxes on income I haven’t earned (instalments)?
Also why do I get charged interest if I don’t pay, but I didn’t need to pay, the government doesn’t pay me interest?
Technically, you’re paying tax on income as you earn it, not before. You’re just not waiting until a year or so later. The government does indeed pay interest in some refunds, if it turns out you overpaid in advance.
I have been paying in installments for few years now.
I have recently opened a non-registered account for some of my investments.
I am curious about how tax works with capital gains though. Let’s say, if I sell stocks in November with a big gain, then the tax installments I paid throughout the year would not be able to cover the tax owed.
In this case, do I estimate the tax owed from that one gain and pay immediately after realizing the gain?
I imagine my capital gain would be different every year, so that the CRA “No-calculation option” would not be applicable.
No, you are not responsible for calculating the tax incurred by your capital gains transaction during the year (technically it would be impossible anyway, because you don’t know until a year’s over what your actual marginal tax rate is). You are only responsible for paying the lesser of what you owe, or the installments requested. So in the case of having a transaction that bumped your tax up above what you paid by installments, you can wait until you file your tax return to pay the real tax liability.
If I have not received a request letter from CRA for instalments, do I still need to pay by June 15, to avoid interest?
My NOA stated I “may” need to pay instalments (it would be the first year) and had a weblink to some info on instalment.
My accountant also included an instalment breakdown with my tax return but I have not had a request letter fom CRA. When do I need to pay instalments? Will they charge interest if I wait for a request letter or am I expected to pay by June 15?
That letter is generated by the tax software (ours does it too!) as a kind of early warning system/value add for the client. But until you receive a notice from CRA you don’t have to start paying instalments, no.
I just got a reminder like this for August,
asking for the below:
Payment due date:
September 15, 2024 $1,808.00
December 15, 2024 $1,808.00
So I work 2 fulltime jobs for over 2 years now -> It is true that at the end of the year I would normally owe in taxes since they only tax me as if I am working the 1 job each. So all of the income from my second job should be in that higher bracket.
However each year I calculate how much I will owe, and map out auto deposits into RRSPs to offset the tax. I have done this the last 2 years and ended up with around 1000 dollar refunds (I like to put more than needed into RRSP to be safe and not owe taxes).
So my question for you, If I just ignore this reminder -> and then come tax season when I file my taxes and it turns out CRA owes taxes due to my RRSP contributions.
Will they have still charged me interest on this amount they’re requesting? or is that removed in the case where it turns out they owe taxes or break even?
Thanks,
Troy
Hi Troy. It sounds like you’re very ‘on top’ of your tax situation. Bravo! If your calculations are correct and you don’t owe tax at the end of the year even without the instalment payments, then there will be no interest charged to you for not paying them. Remember, you’re responsible for the lesser of what they ask for, or what you really owe. If you know you owe less/nothing, you’re fine.
But you’re also correct that the second job is probably in the higher bracket, or at least that you shouldn’t have the payroll department treat the second job as if it’s your only one (which tends to mean that too little tax is withheld). Ideally, one of the jobs should be treating you as if you have no tax exemptions at all — not even the basic one that everyone gets — because the first job is already taking account of that. But it’s not necessary to change anything if your RRSP strategy is covering you and you’re satisfied getting a tax refund at the end of the year. There’s no tax disadvantage to keeping things just the way they are.