If you owed more than $3,000 in net tax (after source deductions) in both the current and one of the two prior years, CRA expects you to pay quarterly instalments — essentially paying as you go rather than facing a massive bill in April. This commonly affects self-employed workers, landlords, retirees whose pensions do not withhold enough, and investors with significant capital gains or dividends. Missing payments triggers daily compound interest at roughly 8-10%, so it is worth setting up automatic payments even if the amounts are estimates.
What Are Tax Instalments?
Pay-As-You-Go Tax
Concept
Details
Why required
Pay tax throughout year
For whom
Self-employed, investors, pensioners
Instead of
Single large payment at tax time
Avoids
Large April tax bill
Why CRA Requires Instalments
Reason
Details
Employees
Tax deducted each paycheque
Others
No regular deductions
Solution
Quarterly payments
Who Needs to Pay Instalments?
The $3,000 Rule
Requirement
Details
Current year
Net tax owing >$3,000
AND either prior year
Net tax owing >$3,000
Quebec
$1,800 threshold
Common Situations
Who
Why
Self-employed
No employer deductions
Significant investment income
Dividends, rental, gains
Pensioners
Some pensions don’t withhold
Multiple income sources
Tax may be owing
Net Tax Owing
Calculation
Details
Total tax
Before deducting source deductions
Minus
Tax already withheld
Equals
Net tax owing
Example
Item
Amount
Total tax owed
$15,000
Tax withheld at source
$10,000
Net tax owing
$5,000
If >$3,000 two years in a row → instalments.
Instalment Due Dates
Quarterly Schedule
Payment
Due Date
Q1
March 15
Q2
June 15
Q3
September 15
Q4
December 15
If Date Falls on Weekend
Rule
Next business day
Saturday
Monday
Sunday
Monday
Holiday
Next day
Three Calculation Methods
Method 1: CRA Calculation
How
Details
CRA sends
Instalment reminder
Amount
Based on prior years
Easiest
Just use their number
Method 2: Prior Year
How
Details
Take
Last year’s tax owing
Divide by 4
For quarterly
Pay
That amount each quarter
Method 3: Current Year Estimate
How
Details
Estimate
This year’s income
Calculate
Expected tax
Divide by 4
Pay quarterly
Which Method?
Situation
Best Method
Income similar
CRA or prior year
Income higher
Current year
Income lower
Current year
Not sure
CRA calculation
CRA Instalment Reminders
What You Receive
Reminder
Timing
February
Before March payment
August
Before September payment
What It Shows
Information
Details
Amounts due
By date
How calculated
Explanation
Ways to pay
Payment methods
No Reminder?
If CRA Doesn’t Send
Action
May not need instalments
Check threshold
CRA calculation
Using online account
Your responsibility
Even without reminder
How to Pay Instalments
Payment Methods
Method
How
Online banking
Add CRA as payee
CRA My Payment
Credit/debit card
Pre-authorized debit
Set up with CRA
Mail cheque
To CRA
Setting Up Online Banking
Step
Action
1
Log into bank
2
Add payee: CRA Federal
3
Account number = SIN
4
Pay amount by due date
Account Number for Payments
Payment
Account Number
Federal instalments
Your SIN
GST/HST instalments
BN (business number)
Provincial
Varies
Interest and Penalties
If You Don’t Pay
Consequence
Details
Instalment interest
Charged on late amounts
Rate
CRA prescribed rate
Compounds
Daily
Current Interest Rate
Rate
~8-10% (varies)
Check
CRA website for current
Compounds
Daily
Example Interest
Late Amount
$5,000
Days late
90
Rate
8%
Interest
~$100
Reducing Interest
If You Pay
Result
Some but not all
Partial interest
Extra earlier
Offsets later shortfall
Current year accurate
May reduce
Quebec Differences
Provincial Instalments
Quebec
Details
Threshold
$1,800
Separate
From federal
Different schedule
May vary
Revenu Québec
Handles
Other Provinces
Province
Requirement
Combined
With federal
No separate
Provincial instalments
Except Quebec
Own system
Strategies
Strategy 1: Match to Income
When Income Varies
Q1 low income
Pay less
Q2 high income
Pay more
Match
To actual expected
Strategy 2: Pay CRA Amount
Always Safe
Pay
What CRA suggests
No interest
Even if overpay
Get refund
At tax time
Strategy 3: Current Year Estimate
When Beneficial
Income lower
Than prior year
Cash flow
Need the money
Document
Calculations
At Tax Time
Instalment Credit
On Return
Line 47600
Total instalments paid
Reduces
Tax owing
Refund
If overpaid
Tracking Payments
Keep Records
Confirmation numbers
From payments
Dates paid
When
Amounts
How much
Special Situations
First Year Self-Employment
Situation
Rule
First year
Usually no instalments
Second year
May start
Third year
Based on prior
Retirement
Situation
Options
Pension income
Request withholding
OAS/CPP
Can request withholding
May avoid
Instalments
Moving Provinces
Situation
Treatment
Tax rate change
Estimate new province
Quebec special
May need provincial
Common Questions
Do I Have to Pay Instalments?
Check
Action
CRA reminder?
Probably yes
Prior years >$3,000?
Probably yes
No reminder
Calculate yourself
What If I Over-Contribute to RRSP?
Scenario
Reduce tax
Through RRSP
Lower instalments
Maybe
Document
Your reasoning
Can I Stop Paying Instalments?
If
Action
Income drops
Adjust payments
Income stops
May stop
Keep records
Justify to CRA
Summary
Key Points
Rule
Remember
$3,000 threshold
Two years
Quarterly payments
Mar, Jun, Sep, Dec
Interest if late
Prescribed rate
Three methods
Calculate yourself
Checklist
Task
Done
Check if required
☐
Set up payments
☐
Mark due dates
☐
Keep records
☐
The Bottom Line
If CRA sends you an instalment reminder, take it seriously — interest on missed payments compounds daily at 8-10%. The easiest approach: just pay the amount CRA suggests each quarter. If your income dropped significantly, use the current-year estimate method to avoid overpaying. Set up pre-authorized debit or recurring bank payments so you never miss a deadline. The four dates to remember: March 15, June 15, September 15, and December 15.