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Instalment Payments

Definition

Instalment payments are periodic payments of income taxes that individuals are required to make to tax authorities on specific dates to meet the amount of taxes they owe when they file their federal and provincial tax returns, due on April 30 of the following year.

The dates for making instalment payments are as follows:

  • March 15th
  • June 15th
  • September 15th
  • December 15th

Instalment payments are required if the net tax payable for the current year or for one of the two previous years exceeds $1,800.

Instalment Payments - Réseau des massothérapeutes

How do youcalculate it?

There are 3 methods of calculation for instalments:

  • The method without calculation[1]: if your income, deductions, and credits do not change much from one year to the next;
  • The method of the previous year;
  • The current year method.

The tax authorities recommend the method without calculation. Interest at the prescribed rate will be payable if the instalments are insufficient in relation to the tax payable. In Quebec, an additional 10% interest may be added if the individual has not made 75% of the payments required.

Note that corporations must also make instalment payments using similar calculation methods, but on a monthly basis.

Advice

A self-employed person’s income can fluctuate widely; a lack of cash to make instalment payments on time could be costly.

Here are some strategies to reduce your tax bill:

  • Prioritize the payment of provincial instalments;
  • Pay at least 75% of provincial payments;
  • Use a line of credit; the interest rate is lower than the tax rate.

Disclaimer

Neither the Réseau, nor FBL, s.e.n.c. assumes any responsibility for the content of this document, which is intended to be informative and not legal. Each user will have to make his own validations while being aware that each case is different.

[1] No-calculation option (federal) : https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments/you-calculate-your-instalment-payments.html.