In Canada, personal tax instalments are prepayments made throughout the year to cover your income tax owing. Rather than paying a lump sum on April 30 of the following year, you may be required to pay in instalments—especially if you earn income that doesn’t have sufficient tax withheld at the source.

Here’s what you need to know about who needs to pay, how to calculate your payments, and how to stay compliant with Canada Revenue Agency (CRA) requirements.

Who Needs to Pay Tax Instalments?

You may be required to pay tax instalments if your net tax owing is more than $3,000 ($1,800 for residents of Quebec) in both the current year and either of the two preceding years.

This typically applies if you:

• Are self-employed

• Earn rental or investment income

• Receive certain pension payments

• Have multiple sources of income where tax isn’t fully withheld

When Are Instalments Due?

Instalment payments are typically due quarterly on the following dates:

• March 15

• June 15

• September 15

• December 15

If the due date falls on a weekend or holiday, your payment is still considered on time if it’s received by the next business day.

How to Calculate Your Instalment Payments

The CRA offers three methods to calculate your required payments:

1. No-Calculation Option
   Pay the amounts shown on the CRA’s instalment reminder. This is the easiest option and helps avoid interest and penalties if you follow it exactly.

2. Prior-Year Option
   Base your payments on the total tax you owed in the previous tax year. This method works well if your income remains consistent year to year.

3. Current-Year Option
   Estimate your current year’s income and tax owing, and make payments based on that estimate. This option may reduce your instalment amounts, but there’s more risk of underpayment.

How to Make Instalments Payments

Instalments can be made using a number of convenient methods:

• Online banking: Add CRA as a payee and use your SIN.

• CRA’s My Payment: Pay directly from your bank account or credit card.

• Pre-authorized debit: Set up automatic withdrawals on the CRA website.

• By mail: Use the remittance vouchers provided by the CRA.

What Happens If You Don’t Pay?

If you miss a payment or pay less than required, the CRA may charge:

• Instalment interest: Based on the amount and length of the delay.

• Instalment penalties: Applied if the interest exceeds $1,000 in a year.

To avoid these charges, it’s best to pay the suggested amounts on time or ensure your calculated payments are accurate.

Need Help Navigating Instalment Payments?

If you’re unsure whether you need to make instalments or how much to pay, the team at Empire CPA is here to help. Reach out to speak with one of our staff members—we’ll walk you through your obligations and ensure you stay on the right track.