Do You Need To Pay 2019 Instalment Payments?
If your net tax owing when you filed your last income tax return exceeded $3,000, or If you live in Quebec on December 31 of a year, use a limit of $1,800 of net tax owing. You may be obliged to make quarterly 2019 Instalment Payments toward your next tax bill.
The majority of Canadians don’t have to make quarterly tax instalment 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. If the tax they owe at the end of the year exceeds $3,000, for CRA, or Quebec $1,800 can request tax instalment payments throughout the year.
How much to pay for 2019 Instalment Payments :
To avoid interest charges, you must pay tax instalments totalling the lesser of a) your tax owing for the year, or b) what CRA requested of you (they usually send you a letter requesting the instalments).
The requested tax instalment 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 instalment payments of $900 each.
When to pay 2019 Instalment Payments :
Tax instalments are due four times per year: March 15, June 15, September 15, and December 15.
However, there is an exception to the 1/4 of the bill 4x per year rule. The first year you’re requested to pay, you won’t be notified until late in the summer. At that point there are only two deadlines left in the year, and CRA may apportion what would have been your four tax instalments over the two remaining deadlines. Meaning, on September 15 and December 15 of that first year, you’d be paying two equal tax instalments totalling whatever you owed the previous year.
What is an instalment reminder?
An instalment reminder is sent to help you determine if you have to pay income tax by instalments. The reminder will suggest an amount to pay and list the calculation options.
CRA and MRQ will send instalment reminders to people who may have to pay tax by instalments:
- The February reminder is for the March and June payments
- The August reminder is for the September and December payments
If Instalment reminder only received in August 2019
If you only received an instalment reminder in August and the reminder does not mention a March or June 2019 instalment payment, follow the instructions that apply to you:
No-calculation option – Pay the amount shown in box 2 of your reminder for September 15 and December 15.
Prior-year option – Calculate your 2018 net tax owing and add any CPP contributions payable, and any voluntary EI premiums payable. Pay 75% of the total on September 15 and 25% on December 15.
Current-year option – Estimate your current-year 2019 net tax owing and add any CPP contributions payable, and any voluntary EI premiums payable. Pay 75% of the total on September 15 and 25% on December 15.
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 instalment(s) dating back to the due date of the missed payment(s). CRA’s interest rate is generally around 5% p.a..
What if the requested tax instalments total more than I owe?
If your tax instalments through the year total more than your final tax bill, you’ll either get the excess refunded to you, or it will be credited toward next year’s instalments.
For example, let’s say CRA is asking for tax instalments because you owed $3,600 in tax last year. But you suspect you’re only going to owe $2,000 this year, so you take that amount and pay four tax instalments of $500 each. If you’re right and you don’t owe tax at the end of the year, there’s no interest charge for paying less than the requested tax instalments.
What if the requested tax instalments total less than I owe?
CRA or Quebec won’t charge you interest for whatever additional tax you owe, so long as you paid the requested amounts. In other words, it’s not your responsibility to predict that the tax instalments weren’t high enough. You’re only responsible for paying the lesser of a) what you owe, or b) what CRA or Quebec requested of you.
About Expert Fiscaliste
Expert Fiscaliste provides Canadian and international income tax preparation and consulting services to individuals, businesses, and trusts.
If you want to take advantage of our services for your 2018 Tax Return or if 2019 July Individual Tax Updates are of interest . Give us a call at 514-954-9031, or visit our Contact Tax Experts page.
