PAYING TAX AND INSTALLMENTS

Tax is collected throughout the year through source deductions and, where withholding is not enough, through quarterly instalments. Any remaining balance is due April 30.

SOURCE DEDUCTIONS

Employers withhold income tax, CPP and EI from every pay based on payroll tables and the employee's TD1.
Payers of pensions, RRSP withdrawals and EI also withhold tax, often at rates that leave a balance owing.
Extra withholding can be requested on a TD1 or from Service Canada.

WHO MUST PAY INSTALMENTS

An individual must pay instalments for the current year if their net tax owing is more than $3,000 ($1,800 for Quebec residents) in the current year and in either of the two preceding years. Net tax owing is total federal and provincial tax minus tax withheld and refundable credits.

DUE DATES

March 15, June 15, September 15 and December 15.

THREE WAYS TO CALCULATE

No-calculation option: pay the amounts on the CRA's instalment reminders (based on the second preceding year for March and June and the preceding year for September and December). No instalment interest is charged if these amounts are paid on time, even if they turn out to be too low.
Prior-year option: pay one quarter of the previous year's net tax owing each quarter.
Current-year option: estimate the current year's net tax owing and pay one quarter each time; instalment interest applies if the estimate is too low.

INSTALMENT INTEREST AND PENALTY

Interest is charged at the prescribed rate on late or insufficient instalments, compounded daily.
Paying early or overpaying later instalments can offset interest on earlier shortfalls (contra interest).
An instalment penalty applies if instalment interest exceeds $1,000: it is 50 percent of the interest above the greater of $1,000 and 25 percent of the interest that would have applied with no instalments.

WAYS TO PAY

Online banking (adding the CRA as a payee for current-year tax, instalments, or arrears).
My Payment (Interac debit) or a pre-authorized debit set up in My Account.
Credit card or PayPal through third-party providers that charge a fee.
At Canada Post outlets with a QR code, or at a financial institution with a remittance voucher.

CANNOT PAY IN FULL

File on time anyway to avoid the late-filing penalty, pay as much as possible, and contact the CRA to arrange a payment plan. Interest continues to accrue on the unpaid balance.