Was I supposed to pay by installments?

[sieben]

When I filed my taxes last year, I got a message in my tax software that I may need to pay my income taxes by instalments in 2021, and that I would receive a notice from the CRA if that was the case.
It's now been a year and I haven't received anything in reference to this, either in the mail or in my CRA Online account.
I'd pretty much forgotten all about this, until this week when I started looking at doing my 2020 taxes.

Does anyone have any insight on this? Am I going to get dinged with a big fine when I file? Or because I didn't hear anything from the CRA about this am I in the clear?
Thanks!

[sieben]

I've been thinking about this and realized this was only ever a notice from my tax software and not something that the CRA ever mentioned, and frankly I have been making "installment" payments throughout 2020 through my paycheques at work. I've ended up owing a bit at the end of the year through a combination of bonuses, consulting income, and dividends, but the majority of my tax bill is paid by the end of the year.

I think I've just about convinced myself this isn't a big deal, but please let me know if you think differently ;) I just hated the thought of a penalty for something I was willing to do, but never was prompted for!

[Mighty Eyebrows]

If CRA didn't send you notices, I doubt you were required to pay installments. They would normally be nagging you several times over the year:

https://www.finiki.org/wiki/Tax_planning#Instalments

You are required to pay your income tax by instalments for a tax year if your net tax owing is more than $3,000 ($1,800 if you lived in Quebec on December 31) in that tax year, and in either of two previous years.[8] An instalment reminder is issued to help you determine if you have to pay income tax by instalments. Two reminders are sent out. The first one is sent in February and is for the March and June payments. The second one is sent in August and is for the September and December payments. The reminder will suggest an amount to pay and list the payment options.

You can also see your instalment reminders and payment history online using the CRA's My Account for Individuals.

Canada Revenue Agency (CRA) has an Instalments section on their website, Paying your income tax by instalments, that provides comprehensive information about tax instalments.

and...

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments.html

Note, this is different than your regular payroll deductions. If you consistently owe more than 3k for several years, CRA wants their cut before the end of the year.

[sieben]

Hey Mighty Eyebrows,

Thanks for the reply, I think that's what I'm thinking too. I haven't heard from them at all, and there is nothing in my CRA account.
That being said, I was just over 3K owing last year and it looks like I will be again for 2020, so I won't be surprised if they do tell me to do it at some point, just wanted to make sure I hadn't missed something.

Thanks!

[techwiz]

Follow up question on the instalments. Does CRA want you to pay in full the amount owing or just enough to keep the end of year tax under $3000 or ($1800 if living in Quebec) ?

[Mighty Eyebrows]

Follow up question on the instalments. Does CRA want you to pay in full the amount owing or just enough to keep the end of year tax under $3000 or ($1800 if living in Quebec) ?

The installment request happens after you have gone over the 3k limit for a couple years. They are guessing that you will continue to go over in the current tax year and so they want you to keep up better.

Once you are in their system, they will send you a notice with the amount they want you to pay. You can read the links for more options, if you think their numbers aren't right.

[SunnyDays]

Follow up question on the instalments. Does CRA want you to pay in full the amount owing or just enough to keep the end of year tax under $3000 or ($1800 if living in Quebec) ?

The installment request happens after you have gone over the 3k limit for a couple years. They are guessing that you will continue to go over in the current tax year and so they want you to keep up better.

Once you are in their system, they will send you a notice with the amount they want you to pay. You can read the links for more options, if you think their numbers aren't right.

Yes, you would get a letter with the amount and when it is due.  The $3000 (or more) will be divided into quarterly amounts.  If you don’t get a notice in the mail, don’t worry about it.  The CRA always lets you know when they want your money!

[sieben]

Thanks SunnyDays!

[techwiz]

Thanks Mighty Eyebrows & SunnyDays.

I have maxed out my TFSA and RRSP contribution room and my taxable investments are starting to produce more income pushing my taxes owing at the end of the year over 3K.  I plan to get my payroll taxes increased to avoid paying instalments. I like the idea of trying to game the system and try to keep my tax owed as close to 3K as possible. ;)