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  1. #1

    Tax Installments

    Anybody here have to pay tax installments? I made just over $30,000 before deductions last year and I have just over $5000 owing this year btwn. taxes and CPP. My accountant said that the government will now make me pay in installments for next year and I'm just trying to find out info. on how that works. He said and websites say that the government will send me notices twice a year, but one of those supposedly comes in Feb. for a payment due Mar. 15th, but it's already past both those dates I'm stressing out now because I don't want to be charged late fees on something I didn't even know I had to pay. Or am understanding this wrong? I've made over 30K once or twice in the past 10 years and never had to pay in installments the following year so I'm wondering if this is some new thing.

  2. #2
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    In past years I've always been able to use my savings to pay it in full but I have heard instalments is an easy process. On the back of my "bill" I got from CRA, there was a number to call to make arrangements. I'd start there and make a phone call.

  3. #3
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    I have been down this road...you have to pay tax in installments if the tax you will owe is $1,800 or more. The amount of CPP is included in the installment payment but is not part of the factoring into whether or not you have to pay instalments.

    The thinking is that people will make a little bit more money each year. With inflation and raises. This is not always true, especially for our job, but that doesn't matter.

    Here is how it works. The CRA will estimate what your tax bill will be for 2015 and send you a notice in the summer, probably July 2015. They will divide that estimate (say $5,000) by 2 payments. Sept 15th and Dec. 15th. So $2,500 each.

    Then, they will estimate what your whole tax bill will be for 2016 (say $5,500) and send you a notice in Jan. 2016. They will take that estimate and divide it in four instalments. (Mar. 15, June 15, Sept. 15 and Dec. 15) each for $1,375.

    Things to know, even if they don't send you a notice, you are responsible for paying instalments if the tax part or the tax bill is more than $1,800 for a year. It is your responsibility to know.

    Also, if you KNOW your tax owing will be less than $1,800 for 2015, you don't have to pay instalments. If you end up owing only $1,799, then there will be no penalty come tax time. However, if it's going to be close, and you can't figure out in advance how much you will owe, you are taking a chance.

    Penalties are charged on each instalment that is late or doesn't cover the amount owing.

    Money you send to CRA in 2016 cannot be used as an instalment for 2015. (Found that out the hard way.)

    You can pay more often than just 4x per year if you want. Online banking makes this easier.

    Oh, and btw, I don't know your accountant, but s/he should know all of this info and should have explained it to you.

    Good luck!

  4. #4
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    I don't know about estimating ahead- I've never had this done here in Ontario. I simply do my taxes for the year and send it off. When I get the notice of what I owe I call the number on the back of the form like 5 Little Monkeys said. They've always been really helpful. You just ask to make payment arrangements and they even ask me how many months I'd like to pay the amount owing over. With interest of course!

  5. #5
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    I think there is a distinction to to made here. If you owe money on your 2014 taxes, it is due by April 30th, 2015. If you make several payments over the next few months to pay that off, those are late payments and, yes, you will have to pay some interest on it.

    That is not what they mean when they talk about installments. If you had a job and had payroll tax taken off on each pay cheque, that is like an installment. You are paying the tax at the time you earn the money. Not the next year.

    But we don't have payroll tax taken off, we are self employed so we have to pay the 2014 taxes in 2015. Unless... you pay the tax in 2015 on the money you earn in 2015.

    So, to the OP, if you owe $5,000 for 2014, you must pay it before April 30, 2015 or else you will have to pay interest. That is separate from paying 2015 tax in installments. The CRA assumes if you owed that much this year, you will owe that much or more next year.

  6. #6
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    I have a question for the original poster. If you only made $30,000 before expenses, how to do owe $5000? I make at least $40,000 per year before expenses and I have never paid $5000 except for the year we cashed in a bunch of RRSPs. My income after expenses is usually between $22,000 and $25,000, so I usually pay about $1500 and that includes CPP

  7. #7
    Euphoric !
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    Yes also curious why you owe so much tax? Sounds high based on your numbers.

    Like everyone else I owe every year. I don't stress about it. I make monthly payments to CRA. Ya I pay interest but so what, it isn't much.

  8. #8
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    I am so, sorry!!

    I was using the Que amount when I said you had to pay installments if your taxes owing was $1,800. The CRA's number is $3,000. I honestly thought they were the same amount.

    All the info is here;

    http://www.cra-arc.gc.ca/tx/ndvdls/t...ts/wh-eng.html

  9. #9
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    I didn't have to pay installments, and I owed $4300 on about $35, 000 gross last year(and I had tons of expenses) I think you need to consider total household income as well, and all of your personal family claims outside of business. Everyone has a unique set of circumstances.

  10. #10
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    Busy ECE....according to CRA you technically should be paying you tax in instalments:

    You have to pay your income tax by instalments for 2015 if your net tax owing is more than $3,000 (unless you live in Quebec):

    in 2015; and
    in either 2014 or 2013.
    You do not have to pay your income tax by instalments for 2015 if your net tax owing for 2015 will be $3,000 or less ($1,800 or less for residents of Quebec), even if you received an instalment reminder in 2015.

    If you received an instalment reminder that shows an amount to pay, you may have to pay your income tax by instalments.

    COPIED FROM CRA WEBSITE

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