Personal Installments
You have to pay tax by installments for the same reason that most people have tax withheld from their income throughout the year. If you earn income that has no tax withheld or does not have enough tax withheld for more than one year, you may have to pay tax by installments.
This can happen if you earn rental, investment, or self-employment income, certain pension payments, or income from more than one job.
Who has to pay?
If your net tax owing is more than $3,000 in 2014 and either in 2013 or 2012.
When payment are due?
For current year, payments are due on Mar 15, Jun 15, Sep 15 and Dec 15
Penalties
You may have to pay a penalty if your instrumental payments are late or less than the required amount. CRA apply this penalty only if your installment interest charges for 2014 are more than $1,000.
Corporations Installments
Corporations generally make monthly or quarterly payments called installments towards their tax liability. There are three options you can use to calculate the least amount of tax you have to pay in installments for the current tax year.
Monthly installment payments
You can calculate your monthly installment payments using one of the following options:
- Option 1 – One-twelfth of the estimated tax payable for the current tax year is due each month of the tax year;
- Option 2 – One-twelfth of the tax payable from the previous tax year is due each month of the current tax year;
- Option 3 – One-twelfth of the tax payable from the year before the previous tax year is due in each of the first two months of the current tax year. One-tenth of the difference between the tax for the previous tax year and the total of the first two payments is due in each of the remaining 10 months of the current tax year.
Are you eligible to make quarterly installment payments?
- A small CCPC is eligible to make quarterly installment payments if, at the time the payment is due:
- - it has a perfect compliance history;
- - it has claimed a small business deduction for the current or previous tax year;
- - together with any associated corporations, for the current or previous tax year:
- – it has taxable income of $500,000 or less; and
- – it has taxable capital employed in Canada for the tax year of $10 million or less.
When you do not have to pay installments
Tax payable of $3,000 or less
You do not have to make installment payments on your federal taxes if the total of your taxes payable under Parts I, VI, VI.1, and XIII.1, determined before taking into consideration specified future tax consequences prior to the deduction of current-year refundable tax credits for either the current or previous year, is $3,000 or less [subsection 157(2.1)].
If your Part XII.3 tax is $3,000 or less in the current or previous year, you do not have to make installment payments on this tax.
Similarly, you do not have to make installment payments on your provincial or territorial taxes if the total of your provincial or territorial taxes for the current or previous year is $3,000 or less; however, you have to pay your taxes, if any, on your balance-due day.
New corporations
Except for Part XII.1 tax, you do not have to make installment payments for a new corporation until you have started your second year of operation. However, for your first year of operation, you have to pay any tax you owe on or before your balance-due day for that tax year.
This information is extracted from Canada Revenue Agency Website. For more information click following links
