Tax Tip Thursday

Remittances vs. Instalments

We have done shows on this before, but it still seems to be problematic, so let’s revisit the topic of remittances vs. instalments.

This is applicable to individuals, small businesses, and corporations for both income tax and HST.

REMITTANCES

Once your return has been filed (HST, T1 Personal or T2 Corporate) and it has been established that you have taxes payable, you are required to pay that amount in full by the due date.   This is a REMITTANCE.

The day after your taxes are payable is the day that the interest starts and it is currently at 8% and it compounds daily!

Interest and penalties – Personal income tax – Canada.ca

So my advice to people that do not have the funds set aside already and if you have access to a line of credit or loan at less than 8%, give strong consideration to using it to pay your tax balance owing.  You will be paying less interest, it will not be in compounded daily and in my experience, you are more likely to pay off a bank loan of your own than to pay off the CRA.

If you can NOT remit the full amount, you should set up monthly payments, establish a 6 month program for yourself with the 1st payment being April 30.  CRA will likely not even contact you if you make the 6 monthly payments.  If you do not, they will contact you, but do not depend on it.  Hiding your head in the sand is NOT good strategy.  Do not think that since you did not get contacted by the CRA, it will go away.  It will not!

INSTALMENTS

And if all that was not enough, if you owed more than $3k, then you are required to make installments towards the CURRENT year taxes.

So if you filed your taxes for April 30 for this year and you owed $6k, then you will be required to not only pay the $6k, but they will also want you to make $6k in instalments for the 2025 tax year.

People often think a couple of things relative to these instalment notices:

  1. these are the REMITTANCE payments for the taxes just filed
  2. they are suggested payments that you should make through the year

Neither is correct.

AND

If you are required to make instalments and you do not, you will be charged interest from whenever the instalments were to have been made

AND

If the interest amount is more than $1000, then you will have to ALSO pay penalties from the date the instalments were to have been made.

So to wrap – do NOT put your head in the sand, pay your tax bill or make arrangements and be sure to pay your instalments!

Making payments to the CRA can be confusing and intimidating.

We are here to help you makes heads or tails of how to pay your CRA bills.  Make An Appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.