If you have received a notification from the Canada Revenue Agency (CRA) to pay instalment taxes, here’s what it means and what you should do about it.
Why Does the CRA Require Instalment Tax Payments?
Typically, instalment tax payments apply to individuals who do not remit enough taxes on their income earned throughout the tax year. The CRA requests instalment tax payments quite often, so don’t panic.
You may have received a notification from the CRA to pay your taxes in instalments because you fall into at least one of the categories below:
- You are a business owner
- You make rental or investment income
- You do not remit enough tax on your income during the year
- You receive certain pension payments
- You receive income from multiple jobs
- You owe more than $3,000 in taxes ($1,800 for Quebec)
When Should I Pay My Instalment Taxes?
Generally, you need to make your tax instalment payments to the Canada revenue agency by the middle of every quarter. Instalment tax due dates are March 15, June 15, September 15, and December 15.
If tax payment deadlines fall on a weekend, the tax deadline will be the next business day. You must pay your instalment taxes when due to avoid late payment fees and penalties.
How To Pay Instalment Taxes
The CRA will send online and mail reminders to pay your tax instalments. If you prefer, you can log into your CRA My Account to view the tax reminders online.
You can pay your instalment taxes online, in person, or by mail.
To make online instalment tax payments, you can do this through your financial institutions’ online banking platform or a pre-authorized debit transaction.
The CRA also provides an online platform called My Payment that allows you to pay your taxes using a debit card. You can also make instalment tax payments using third-party services such as PaySimply and Plastiq.
Alternatively, you can pay your instalment taxes at your financial institution or a Canada Post location. You need to bring a personalized remittance voucher (form INNS3) to make in-person payments.
You can also mail a tax payment cheque to the Receiver General for Canada with your remittance voucher and any payment instructions.
Frequently Asked Questions on Tax Instalments
How do I know the tax amount to pay?
If your income, tax deductions, and credits are similar every year, the CRA would determine your tax instalments based on your most recent tax assessment.
If your income, tax deductions, and credits vary by year, you will need to calculate your tax payments based on your net tax owing, your CPP contributions payable, and your voluntary EI premiums. This annual CRA calculation chart for 2022 helps you calculate the tax amount to pay.
If your tax situation seems complicated, an accountant can help you figure it out. Also, when in doubt, call the CRA for clarifications (but get comfortable when you call; wait times are legendary).
Can I appeal the tax instalment payment?
You need to make your tax payments by the payment deadline. However, if you receive a reminder to make tax instalment payments and your net tax owing amount is $3,000 or less ($1,800 or less for Quebec), you do not have to pay instalment taxes.
If you receive pension benefits, you can reduce or eliminate tax instalment payments by increasing the tax withheld from your pension income.
Disclaimer: This article is for general information purposes only, and is not legal, financial, or tax planning advice. Everyone’s situation is unique, and this article cannot apply to every person. The reader should not take any action, or refrain from taking any action, as a result of this article without first obtaining legal or professional advice.