Taxes

When Are Income Tax Instalments Due?

Marin Perez
Taxpayer reviewing her filing

Canadian taxpayers may have to pay income tax in instalments. Income earned through self-employment, rental property, investments, certain pensions, and multiple jobs can lead to this situation.

What is tax withheld?

Tax withheld is an amount an employer or payer withholds from a salary or payment, to remit directly to the government. Examples of withholding are listed in the Income Tax Act's Section 153(1).  Employers calculate how much to withhold based on amounts reported on the federal and provincial/territorial TD1 form. An employee who earns commission income may also use the TD1X form. Those who wish to reduce amounts withheld at the source can fill out a T1213 form.

Who has to pay tax instalments?

Those who earn income that has no tax withheld or don't have enough tax withheld may pay tax in instalments. This could include the self-employed, real estate investors and more.

Who is exempt from paying tax instalments?

An incorporated new business is not required to make instalment payments until the second year of operation. You should pay first-year income tax on or before the due date. Income from carved-out property is an exception, and taxes on such income, reported in Part XII.1 of the income tax return, are paid in instalments. Carved-out income can include amounts earned through natural resources such as gas or oil, or head leases.  Under the Income Tax Act's 156(2), no instalments are required if:

     
  • Farming or fishing constitute the main source of income and the net tax owing for that year or either of the two preceding years is within the instalment threshold
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  • Net tax owing for that year or for each of the two preceding years are within the threshold
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  • A graduated rate estate applies for that year.

Instalment payments are not required if the tax year is shorter than a month, or shorter than a quarter for an eligible CCPC.

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What are the due dates for tax instalments?

Your instalment due dates are:

     
  • March 15
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  • June 15
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  • September 15
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  • December 15.

How much do you pay for tax instalments?

If you're paying instalments, you'll fork over:

     
  • of the amount of income tax due that year, or
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  • of the instalment base for the preceding tax year.

Alternatively, instalments due on March 15 and June 15 will be of the instalment base for the second preceding tax year. Instalments due September 15 and December 15 will be:

     
  • the amount by which the preceding year's instalment base exceeds the instalment base for the second preceding tax year.

What is the last date to pay income tax instalment reminders?

The CRA sends reminders February for the March and June payments. It will then send reminders in August for the September and December payments.  Sometimes, the CRA will only send an August reminder. In this case, the taxpayer is asked to apply one of the following:

     
  • No-calculation option: Pay the amount shown in box 2 of the reminder
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  • Prior-year option: Calculate previous year's net tax owing, and add any payable CPP and EI amounts. Pay 75% of the total on September 15 and the rest on December 15
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  • Current-year option: Calculate current-year net tax owing, and add any payable CPP and EI amounts. Pay 75% of the total on September 15 and the rest on December 15.