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Discussion Starter #1
For the instalment payment to CRA that is due on March 15, 2015, is the payment counted as tax paid for the 2014 tax year or the 2015 tax year? It's more beneficial to delay taxes payable, so paying the 2014 taxes in 2015 would be more beneficial.

If it's counted for the 2014 taxes paid, that means you'd make the 2015 tax year instalment payments starting in Jun 2015, then again in Sep, Dec, plus Mar 2016. Is this right? And there will be no interest penalty if you pay the no-calculation amount each time?
 

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The March 15, 2015 installment is counted toward taxes owing in the 2015 tax year. It will show up as a credit in your account for 2015. The 2014 tax year is history now.
 

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The whole purpose of the "installment" program is to take away the benefit from you and retain it for them, of paying your taxes later as opposed to everyone else who has tax withheld on every paycheck.

It also reduces the size of each obligation, where I am sure many Canadians were found to have a great financial year and then only to see them file bankruptcy the next year when they got the tax bill. Could there be a bigger idiot? Filing bankruptcy because they made too much money. Anyway, I am sure the instalment program was also designed to help those children out, as well.
 

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Discussion Starter #4
The March 15, 2015 installment is counted toward taxes owing in the 2015 tax year. It will show up as a credit in your account for 2015. The 2014 tax year is history now.
Oh, I counted my 2015 Mar payment as part of 2014's taxes paid, and in their notice of assessment the CRA allowed it. This looks like I technically did not make my Mar 2015 payment and have incurred interest charges under the no-calculation method: "We have transferred $xxxx from your 2015 instalment account to reconcile your instalment claim on line 476 of your 2014 income tax return. As a result, your 2015 instalment account balance is now $0.00. You may want to review your 2015 instalment account and consider making a replacement payment, to eliminate or reduce possible interest charges."

I think what I should have done was to not include my March 2015 instalment payment in my 2014 return, and instead pay more in taxes owing when I filed for 2014, then I could keep the instalment credit for Mar 2015.
 

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Interesting that CRA would do that for you. If I were you, I would pay the March 15 amount again a second time, so you are up to date with the payments.
 

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Discussion Starter #6
Yeah that's what I'm doing. A question though: since there are 3 methods available for determining instalment payments (no-calculation, prior-year, and current-year), which method would the interest penalty for late payments be based on?
 

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Income tax by installments

I read the following information from an article.. Hope it helps you...

"You do not have to pay your income tax by installments 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 installment reminder in 2015.

If you received an installment reminder that shows an amount to pay, you may have to pay your income tax by installments."

Thanks for sharing...
 

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Discussion Starter #8
Yes the quesiton is, what if my tax owing was more than $3000 and was also late on a scheduled payment? Conservatively one would guess that it'd be based on the worst option, or optimistically it might be based on the best option.
 

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The 3 options listed on the "Installment Reminder" form are confusing. If you read the third option, which is the "Current year option", it says "On each due date, pay one quarter of the total of your estimated 201x net tax owing". I tried to get creative one year and chose to pay less than the required amounts because I thought that my income would be slightly less that year. I ended up having to pay a penalty in April, so since then I've just paid the indicated amount every quarter and I know there will never be a penalty if I continue to do so.

Funny story about that penalty: I paid it immediately when I noticed it online in "My Account", then when I checked later to see that the money was there, they had reassessed the penalty and reduced the amount owing, so I had a surplus in my account. They credited my chequing account a month later for the extra money which was around $20 if I remember correctly.
 

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Funny story about that penalty: I paid it immediately when I noticed it online in "My Account", then when I checked later to see that the money was there, they had reassessed the penalty and reduced the amount owing, so I had a surplus in my account. They credited my chequing account a month later for the extra money which was around $20 if I remember correctly.
You're confusing 'funny' with 'mildly interesting'
 

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A question about installments. I don't currently require them, since in 2019 there are sufficient withholdings at source. However, I expect that in 2020 that I will not have withholdings at source (no employment income). Currently, I think I will be living off my capital. The details remain to be seen; if my existing cash is enough to live off, then I may not incur capital gains.

Let's say I'm in 2020 and start to see that I've generated significant dividends, interest, and capital gains with no withholdings yet.

Would I have an obligation to proactively start my instalment payments within that same year, 2020, even though I haven't heard anything from CRA? Or would I wait until I file my taxes in April 2021 and then hear back from CRA?
 

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James, in my experience you wait for the CRA to flag the need for installment payments. They'll first have info based on your 2020 tax filing in spring 2021. I believe, if it is over $3k threshold tax owing ($1.8k Que) and was also over the threshold in one of the 2 prior years then they will issue you a notice.

If you drop below the threshold again it can take a few years for the installment notices to become zero and end. I find it easiest to just pay what they request and let it sort itself out at tax time the next spring.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments/you-have-pay-tax-instalments.html
 

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A question about installments. I don't currently require them, since in 2019 there are sufficient withholdings at source. However, I expect that in 2020 that I will not have withholdings at source (no employment income). Currently, I think I will be living off my capital. The details remain to be seen; if my existing cash is enough to live off, then I may not incur capital gains.

Let's say I'm in 2020 and start to see that I've generated significant dividends, interest, and capital gains with no withholdings yet.

Would I have an obligation to proactively start my instalment payments within that same year, 2020, even though I haven't heard anything from CRA? Or would I wait until I file my taxes in April 2021 and then hear back from CRA?
The instalments never represent the present year. They're divided into two parts (March/June) and (Sept/Dec). In Feb and Aug each year, CRA will send the notice of the next two payments due.

If instalments are required you wait for CRA to tell you what to pay, and then you pay exactly as told. This will be after you meet the requirements of owing over $3K.

The very first time you have to pay is usually for (Sept/Dec) since they don't have your tax return for the previous year by the time they need to send out the Feb notice for the (March/June) payments.

Once you start payments, then the next year the first two instalments (March/June) will be half of the instalments from the previous year since the notice is sent in Feb before the April tax return is in. Then the last two payments of the year (Sept/Dec) make up the difference between what you have paid already in (March/June) and what you owe for the year once the April tax return reveals the taxes.

ltr
 

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Thanks. Then it sounds like I will wait for CRA to tell me what to pay. It sounds like I should get used to doing those instalments, but at least I won't have to tackle this until 2021.

I presume that you whatever you pay simply gets credited to your account, the same as any other withholding, meaning that any excess payments comes out in the wash? Once I pick up another job in the future, I'd have tax withholdings on employment which, added to instalments, would put me far in excess of what I owe.

Does that all net out properly or does one need to be careful about anything there, other than cashflow concerns?
 

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Installment payments get reported on your T1, any overpayment sorts itself out at taxtime. The CRA's My Acc will show payments. You can pay installments through online banking.
 

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Thanks. Then it sounds like I will wait for CRA to tell me what to pay. It sounds like I should get used to doing those instalments, but at least I won't have to tackle this until 2021.

I presume that you whatever you pay simply gets credited to your account, the same as any other withholding, meaning that any excess payments comes out in the wash? Once I pick up another job in the future, I'd have tax withholdings on employment which, added to instalments, would put me far in excess of what I owe.

Does that all net out properly or does one need to be careful about anything there, other than cashflow concerns?
As you say, it all comes out in the wash. It just takes time. The payments are always behind such that the first two payments in the year are for two years ago tax returns, and the last two payments are for a year ago. I keep a spreadsheet and with it I can tell exactly what CRA is going to ask for in Feb and Aug requests, but they've never made a mistake and I've paid for as long as I can remember, so my keeping track is likely my pedantic nature.

If your income and tax payments are all over the map, it might be prudent for you to keep track, just so you can predict what is coming with the next notice from CRA. Either way, just pay what they say and you'll never be on their wrong side.

ltr
 

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just pay what they say and you'll never be on their wrong side.
This has been my approach. If you "know better", fine. But if you "know better" and are short, there will be fines. The safest approach is just to pay what they say. I think the only time I wouldn't would be if I had a large one-time bill and they came after me for an outrageous amount the next year.

They never make a mistake because, by definition, the only mistake is to not bend to their will.
 

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The very first time you have to pay is usually for (Sept/Dec) since they don't have your tax return for the previous year by the time they need to send out the Feb notice for the (March/June) payments.
They send out an email notice that the payments schedule is on MyCRA. However, they send it out every day until you log on. I was on a 10 day trip and did not take my laptop so I got 2 notices every day (self and spouse) until I returned home!
 

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The document titled "Instalment Reminder" will be sent twice a year that is really your instalment notice for the next 2 quarters. It can't really be a reminder if they haven't told you yet how much it should be.

But so much for pedantry. A second (or 3rd) page on the Instalment Reminder will list the past payments received to date in that tax year. So the reminder you get in December FEBRUARY will include the payments made for that year, and an instruction to enter the total in an appropriate box on your T1.

PS - As others have rightly pointed out, the reminder comes in mid-February, not December. I don't know what I was smoking'.
 
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