Do you have to pay tax by instalments?

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Why should you pay tax by instalments?

If you earn income that has no tax withheld or does not have enough tax withheld for more than one year, you may have to pay tax by instalments.

This can happen if you earn rental, investment, or self-employment income, certain pension payments, or income from more than one job.

What are the factors to consider?

There are three factors to consider when determining if you have to pay tax by instalments:

  • your province or territory of residence
  • your net tax owing
  • if you are a farmer or a fisher

Province or territory of residence

Your province or territory of residence will determine the threshold of net tax owing you will use when determining if you have to pay tax by instalments.

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.

Net tax owing

Generally, your net tax owing is the amount you owe on your income tax and benefit return. The items used to calculate net tax owing (line 15) are listed in the Calculation chart for instalment payments for 2016.

You have to pay your income tax by instalments for 2016 if both of the following apply:

  • your net tax owing for 2016 will be above the threshold for your province or territory ($1,800 or $3,000)
  • your net tax owing in either 2015 or 2014 was above the threshold for your province or territory

You do not have to pay your income tax by instalments for 2016 if your net tax owing for 2016 will be $3,000 or less ($1,800 or less for residents of Quebec), even if you received an instalment reminder in 2016.

If you received an instalment reminder that shows an amount to pay, you may have to pay your income tax by instalments.

Farmers and fishers

If your main source of income in 2016 is self-employment income from farming or fishing, you must make an instalment payment if both of the following apply:

  • your net tax owing for 2016 will be above the threshold for your province or territory ($1,800 or $3,000)
  • your net tax owing for 2015 and 2014 was above the threshold for your province or territory ($1,800 or $3,000)

What is an instalment reminder?

An instalment reminder is sent to help you determine if you have to pay income tax by instalments. The reminder will suggest an amount to pay and list the calculation options.

The CRA sends instalment reminders to people who may have to pay tax by instalments:

  • The February reminder is for the March and June payments
  • The August reminder is for the September and December payments

If you only received an August reminder, see Instalment reminder received in August 2016.

If you received an instalment reminder and you are required to pay instalments but do not comply, you may have interest and penalty charges.

You can also see your instalment reminders online using My Account.

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