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.
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.
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.
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:
Instalment payments are not required if the tax year is shorter than a month, or shorter than a quarter for an eligible CCPC.
Your instalment due dates are:
If you're paying instalments, you'll fork over:
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 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: