Hi,

I live in BC and on Friday I received an installment reminder and I am not sure why I received it. I have been in Canada since 2013 and I paid full taxes for the years 2013 and 2014. Does anyone else have a similar experience? It also doesn't make it clear for which year this is for.

I've just been reading a horrifying article on CRA and IRCC scams although these have been by telephone in the Toronto area. Check the CRA website and call their helpline using the number on the website. There's info on scams on the website too. Not saying it is, but if you're unsure best to check.

Please could you also report back on this as well.

S

Thanks. I was planning on calling them to make 100% sure but thought I would see if anyone else has received this letter in the past.

Use the number on the website, rather than on the letter (of course it may be the same).

Even if genuine, you need to know why you're paying.

S

If you owed more than $3,000 when you filed your last tax return the CRA will invite you to make installments towards the tax you will owe for the current year throughout the year. Installments are always for the year in which they are paid.

Installments are not compulsory. The onus is on you to estimate how much tax you will owe and pay appropriate installments. If you estimate that you will not owe any tax when you file your return then you don't need to make any installments.

The carrot is that if you make the installments the CRA request there will be no interest or penalties even if you end up owing more. The stick is that if you don't make any installment payments (or inadequate ones) the CRA will charge you interest on the installments you should have made.

When you completed your last tax return did you have an extra amount to pay, perhaps as a result of untaxed income? If so, CRA will expect you to pay quarterly payments, and if you don't pay you will be required to pay interest on the unpaid amounts. The fact that you paid your full taxes for the two years is irrelevant to them. I require to make quarterly payments in addition to those taxes deducted at source.

In 2014, I had UK income until Aug and some Canadian income after that. I declared all this and ended up paying well over $3K in taxes. As a result, I thought I was up to date on all my tax payments. For all of 2015, I worked in Canada only.

It's been a bit of a mess though as I have been double taxed for 2013 and 2014 from both Canada and the UK. I am still trying to get my taxes back from the UK gov and it is still in progress, 3 years and counting. I am waiting for my certificate of residency from CRA which I need to send to HMRC.

I wish the tax system here was like the UK, where we don't have to fill out tax forms every year, unless you are self-employed (which I am not). I guess this is something that takes time to get used to...Monday morning whinge over!

OK, I'm sorry if I scared you ... I'd literally just read this article and then read your post:

RCMP Ontario Fraud Awareness Campaign: Fraudsters threaten new immigrants with deportation -- MILTON, ON, Feb. 22, 2016

I did not know about the instalment thing (please excuse my British spelling!).


S

If you only have employment income in 2015, and your employer withheld tax/CPP/EI, then it is unlikely you will owe much, if anything, for the year when you file your 2015 return. If you expect the same for 2016 then there does not seem any need to pay installments.

I have a question for you.

I've just received my reminder from the CRA. I presume it is based on my last filing (I haven't filed my 2015 return yet). Do they do the calculation based on what you really made or what you made after contributing to RRSPs?

It is based on what you paid in the previous year. If you had RRSP contributions in that year the current installments requested will, effectively, be net of RRSPs.

I see. I recently bought a chunk of RRSP for 2015 ($20k). If I don't keep repeating that exercise, I can see my installments getting way out of whack at some point.

I'm in a similar position to the OP but a year ahead (I think) - we moved here in 2012. Most of my income is from the UK, so doesn't show up in the Canadian ''tax slips". For the 2012, 2013 and 2014 years I paid tax to the CRA the following April, submitting it along with my tax form. (And going through the usual nausea of being double taxed, claiming tax back from HMRC etc.). Half way through 2015 CRA asked me to pay the tax for 2015 in installments, rather than when returning my 2015 tax form. Now I've been asked to pay in installments for the current (2016) tax year, estimated from my income in 2015. My accountant assures me it's all OK, and it does seem to make sense when you think about it. It basically means that you have to pay tax each quarter rather than at year-end.

Pretty much identical to my situation for over a decade. It works fine. Just remember to keep the cash aside and make sure your installments are going to cover your tax hit.

So you have been paying instalments for the last 10 years? This thing confuses me as I am paying taxes through my workplace and on top of this I am paying via instalments, seems crazy to me!!!