Do You Need to Be Worried About Paying Your Tax Instalments?
Some Ontario tax payers become so concerned about not paying their taxes properly that they wonder if they should be paying tax instalments. Often these are the people who never end up owing taxes, but are always concerned if there is any change in their income that they will be hit with a big bill at the end of the year.
So what is tax instalments anyway?
When you are working as an employee the taxes owed on your income is held back each pay check and submitted to the CRA by your employer. The Canadian government assumes that this should be a practice by anyone that earns a taxable income throughout the year. This could be a self-employed individual, or a person who receives rental income as an investment, and these are just two of many examples. It really is wise to utilize the services of a Toronto accountant if you happen to live in this area and think that you may have a more that simple tax situation.
There are different approaches that can be taken to tax paid by instalments but you need to rely on the advice of a professional who specializes in taxes for guidance. Now the CRA does tell you that you can have a reduction or no tax instalments made if you reduce the amount of your net tax owing. One way of doing this is by reducing your income, which is not an option for most of us, or by having taxes withheld at the source which again is not always a choice.
Seniors can ask to have income tax held from their Old Age Security income, as well as their Canada Pension Plan Payments. Some individuals do choose to do this because they don’t like being hit with a tax bill at the end of the year. They don’t miss the monthly income reduction for the tax deductions as much.
If you are expected to pay tax instalments then the CRA will notify you and send you a tax instalment package.
You may be thinking that you can just ignore these instalment notifications but this may not be a wise idea. You could end up paying penalties and interest.
Tax instalments can have its advantages but it can also be a burden for some individuals. Don’t hesitate to talk to us here at Toronto Accountant and let us advise you as to where you stand with tax instalments.