Tax Installment Series: What do you need to consider when paying by tax installments?

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So, we’ve already introduced the vivacious blog series on tax installments. Yes, two whole weeks of tax installment fun!

This week, we take a look at what items you should consider when deciding if you have to pay by tax installments and why you should pay by installments.

 

What should you consider when deciding if you have to pay by tax installments?

No one likes to be hit with a huge tax bill. But that’s where sassy tax installments come in, or prepayments that  you make on certain dates to pay off your balance owing instead of paying in a lump sum!

Here are the two factors to consider when determining if you have to pay tax by installments:

  • your net tax owing
  • your province or territory of residence

Net tax owing

Your net tax owing is the amount you owe on your tax return. The items used to calculate net tax owing (line 15are listed in the Calculation chart for installment payments for 2017 on the Canada Revenue Agency (CRA) website.

 

Your province or territory of residence

To determine the threshold of net tax owing you will use when determining if you have to pay tax by installments, look at your province or territory of residence.

If you live in Quebec on December 31 of a year, use a limit of $1,800 of net tax owing.

If you live in any other province or territory on December 31 of a year, use a limit of $3,000 of net tax owing.

 

Why you should pay by installments

You have to pay your income tax by installments for 2017 if both of the following apply:

  • your net tax owing for 2017 will be above $3,000
  • your net tax owing in either 2016 or 2015 was above $3,000

You do not have to pay your income tax by installments for 2017 if your net tax owing for 2017 will be $3,000 or less.

If you received an installment reminder that shows an amount to pay, you have to pay your income tax by installments.

The same applies if your main source of income in 2017 was self-employment income.

Mo money, mo installments!

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