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Income Tax Installments

Taxpayers who meet certain conditions, are required to pay taxes in installments. An installment is a periodic payment of tax otherwise payable in lump sum in April of the following year. The Income Tax Act requires self employed people and corporations to make installment payments so that they are treated the same as employed taxpayers who have tax deducted from their employment income.

Individuals will have to pay their income tax by installments for 2012 if the net tax owing will be more than $3,000 for 2012 and was $3000 or greater in either 2011 or 2010. Due dates for the payments are March 15, June 15, September 15 and December 15, 2012. CRA will send you a remittance form with their calculation of your installment payment. If you expect your income tax for 2012 will be less than the amount of the total of installments for the year that they calculate, you may send in a lesser amount based on your estimate.

Self employed farmers only have to make one installment payment by December 31, 2012 of at least two-thirds of the net tax owing if the main source of income is from farming, and in each of the years 2010, 2011, and 2012 the net tax owing is more than $3,000.

Corporations have three options to calculate their installment payments. Installments can be based on estimated tax payable for the current year, the previous year's tax payable, or the second previous year.

Interest will be charged at the time your income tax for 2012 is assessed if installment payments were due and not made. As well, if the interest calculated is more than $1000, CRA may charge an installment penalty.