Do you need to make installments?
Whether business or personal, everyone knows that the time will come when they must pay the CRA. However, what may surprise you is that the CRA sometimes demands their money in installments. You need to be prepared to make these installments, or the CRA will charge you interest and penalties. Below are the thresholds to watch out for, so you can budget and avoid paying the CRA more than you need to!
Personal Installments
You must pay personal tax installments if:
- Your previous years personal taxes owing were over $3,000
- Your current years taxes are estimated to be over $3,000 owing
Note, if your current year taxes will be less than $3,000 owing, you will not need to pay installments even if your previous year was over the threshold.
The CRA will send you installment reminders in either February or August. The only time you should ignore these are if your current year taxes will be under $3,000.
If you don’t remit installments the CRA will charge you interest and penalties.
You can find more information on personal tax installments here.
Business Installments
Businesses must also pay installments to the CRA for their corporate taxes and GST. As with personal installments, if you do not make your installments to the CRA, they will charge you interest and penalties.
You will notice that $3,000 is the running theme throughout the rules for installments. This is also the magic number the CRA has chosen for corporate taxes and GST.
Corporate Taxes
Corporate tax installments are very similar to personal taxes, you will not have to make installments if your taxes are less than $3,000 owing in the current or previous year. Or, if the corporation is new, installments will not need to be made in the first year of operation.
However, even if your company falls into one of these two scenarios and you do not have to make installments, you must ensure that the taxes are paid by the due date. Or the CRA will still charge you interest.
Installments for corporate taxes can be made either monthly or quarterly. To calculate the installments due you can either use what you estimate this years taxes owing will be or use the previous years tax number. The CRA will charge you interest if you chose to estimate this years taxes and you have remitted less than the actual amount.
You can find more information on corporate installments here.
GST
GST installments are only applicable if you are an annual filer. You will need to make them no later than a month after each of your fiscal quarters. The rules are the same as all other installments, they must be made for GST if the amount owing in the previous year or current year is over $3,000. As with corporate taxes you can calculate the installment amount by either using the previous year GST owed, or estimate the current years. Again, they will charge you interest if you estimate too low.
You can find more information on GST installments here.
