The CRA Wants You To Make Your Installments! You Do Too!!

Did you know?

You can see your installment amount in the CRA’s My Account and make your installment payments online.

Even better, you can see your installment amount online!

To see your installment amount online, you need to login to My Account, select “View mail,” and click “Instalment.” If you don’t have My Account, you can register now, I’ve hyperlinked it for you, but understand that the registration process can take weeks.

Also, I do not recommend providing the CRA with Direct Deposit information if you have a tax liability or intend on having one any time soon as they will use that bank source to clean out your bank account… I’m just saying…  If I still worked there, I would too.

Back to installments…

Don’t forget: If you signed up for online mail, you may receive an email notification for your instalment reminder from the CRA!

If you fail to make your installment payments you will be penalized by the CRA, as laid out here;  http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/ntrst-eng.html.

Instalment interest

You will be charged interest if all of the following conditions apply:

  • The CRA sends you an instalment reminder in 2016 that shows an amount to pay
  • you must pay by instalment in 2016
  • you did not make instalment payments, or you made payments that were late or you paid less than what you had to pay

The CRA charges instalment interest on all late or insufficient instalment payments.

Instalment interest is compounded daily at the prescribed interest rate.

How the CRA determines the interest?

  1. The CRA calculates interest on each instalment payment that you should have paid from the day it was due to your balance due date based on the payment option that results in the least amount of interest.
  2. The CRA calculates the interest on each instalment you paid for the year starting from the later of the date the payment was made or January 1 up to the balance due date.

Then, they determine the interest you owe by charging the difference between a. and b., if the difference is more than $25.

Instalment penalty

You may have to pay a penalty if your instalment payments are late or less than the required amount.

The CRA apply this penalty only if your instalment interest charges for 2016 are more than $1,000.

To calculate the penalty, the CRA will determine which of the following amounts is higher:

  • $1,000, or
  • 25% of the instalment interest that you would have had to pay if you had not made instalment payments for 2016

Then, they subtract the higher amount from your actual instalment interest charges for 2016.  Finally, they divide the difference by two and the result is your penalty.  Clear as mud, eh?

Example

For 2016, John made instalment payments that were less than he should have paid. As a result, he has $2,500 of actual instalment interest charges for 2016. If John had not made any instalment payments in 2016, his instalment interest charges would have been $3,200. Since 25% of $3,200 is $800, we subtract $1,000 (the higher amount) from $2,500. The difference is $1,500. Then, we divide $1,500 by two. John’s penalty is $750.

Now the good part!

How can you reduce your instalment interest and penalties?

You can reduce or eliminate the interest charges and penalties by overpaying your next instalment payment or by paying it early. By paying early or overpaying, you will earn instalment credit interest. This credit interest is not refundable and can only be used against any interest charges on late payments for the same tax year.

 

How to Pay:

Choose the electronic payment method that’s right for you:

Online banking – Through your financial institution’s online banking, add the Canada Revenue Agency (CRA) as a payee and look for the “tax instalments” payment option.

Debit card – The CRA’s My Payment service lets you pay with your Visa® Debit or Interac® online debit card through participating financial institutions.

Pre-authorized debit – You can set up a tax payment in advance. You choose the bank account, the amount, and the date or dates of the transaction.

Credit card – You can use a third-party service provider that offers additional payment methods, including credit cards.

Carefully enter your social insurance number as your account number so the CRA can apply your payment to the intended account.

For more information, watch our video Change it up: Pay your taxes online and, go to make a payment to the Canada Revenue Agency.

Stay connected with the CRA:

On Twitter – @CanRevAgency.

Subscribe to a CRA electronic mailing list.

Add their RSS feeds to your feed reader.

You can also watch their tax-related videos on YouTube.

 

Here is What is NEW for the 2014 Canadian Tax Filing Season

  • Children’s fitness amount – Under proposed changes, the maximum amount of eligible fees for each child has increased to $1,000.
  • Search and rescue volunteer amount – As a search and rescue volunteer, you may be able to claim an amount of $3,000.
  • Family Tax Cut – A proposed non-refundable tax credit of up to $2,000 is available to eligible couples with children under the age of 18, and is effective starting with the 2014 tax year.
  • Universal Child Care Benefit (UCCB) – Under proposed changes, this benefit is being increased for children under age six. Effective January 1, 2015, parents will be eligible for a benefit of $160 per month for each eligible child under the age of six – up from $100 per month. Under proposed changes to expand the UCCB, parents may also receive a benefit of $60 per month for eligible children ages six through 17. Payments of the additional amount and expanded amount will start in July of 2015.
  • Emergency services volunteers – Rules for the $1,000 exemption for emergency services have changed.
  • Adoption expenses – The maximum amount of eligible expenses for each child has been increased to $15,000.
  • Medical expenses – Amounts paid as salary for designing of personalized therapy plans for persons eligible to claim the disability tax credit and costs for service animals used to help manage severe diabetes, are now eligible as medical expenses.
  • Investment tax credit – Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2015.
  • GST/HST credit – You no longer have to apply for the goods and services tax/harmonized sales tax (GST/HST) credit. When you file your return, the Canada Revenue Agency (CRA) will determine your eligibility and will advise those who are eligible to receive the credit.  If you have a spouse or common-law partner, only one of you can receive the credit. The credit will be paid to the person whose return is assessed first. The amount will be the same, regardless of who (in the couple) receives it.
  • Online mail – When you register for online mail, you’ll have instant access to your tax records anytime, anywhere. Choose to receive an email notification that your notice of assessment or reassessment is available online. You can register for this service, which begins February 2015 by either adding your email address on your T1 return, or by registering directly at www.cra.gc.ca/myaccount.
  • Mobile application: In February 2015, the CRA will be launching a mobile app for individual taxpayers.

CRA online services make filing easier and getting your refund faster

The CRA’s online services are fast, easy, and secure. You can use them to file your income tax and benefit return, make a payment, track your refund, receive your notice of assessment, and more, which is great for keeping on top of your taxes and especially should there be an issue.

The only concern I have, surrounds the notice that the Government of Canada is switching to direct deposit for all payments that it issues? This includes your tax refund and benefit payments. They would like you to sign up for direct deposit.  More information is available here: www.cra.gc.ca/getready.  However, by providing the CRA with a bank source for direct deposit, also means that they have a source for collection purposes should you run into tax trouble and have a balance with the CRA.

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You can also visit our YouTube Channel for tax-related videos.