Tax Instalments

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tedster
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Re: Tax Instalments

Post by tedster »

I make quarterly instalments to both governments. Most of the time these are based on the notices I get from both governments. I draw income from my RRIF. As I am drawing more than what the government says I should, the RRIF people (Nat'l Bank) withhold some of the excess for taxes. I believe they remit these monthly. My questions are: is this RRIF tax represented in the quarterly instalments or are these notices net of those with held taxes? or do they just represent the total estimated taxes due in quarterly instalments? I want to accrue taxes for instalments, but I don't want to over accrue and get it back as a refund. I hope this was clear? :oops: :?
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Re: Tax Instalments

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It is my understanding the govts estimate of quarterly installments is based on your past year's installment payments adjusted for any amount owed or refunded on your last tax return. CRA assumes the rest of your income/tax profile remains the same.

So....to answer your question, if you have had taxes withheld from your (excess) RRIF payments in the past and you are simply continuing what you have been doing, CRA assumes that income pattern and taxes withheld at source will remain so. So I would conclude taxes withheld are thus factored into your installment payments.
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tedster
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Re: Tax Instalments

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AltaRed wrote
So I would conclude taxes withheld are thus factored into your installment payments.
Thanks fopr this, I thought so too. This means I should not be accruing based on these notices, but sub=tract the with held amount.
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Re: Tax Instalments

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No idea what you just said.... You should simply accrue for your installment payments as presented to you by the gov't.
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Re: Tax Instalments

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You should check CRA MyAccount. They are pretty accurate in where the money is. I use it all the time to determine where "they" think I am, since nothing else seems to matter. I got onto this when they screwed up the credit of arrears and installments. Don't fight it.
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Re: Tax Instalments

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tedster wrote: My questions are: is this RRIF tax represented in the quarterly instalments or are these notices net of those with held taxes? or do they just represent the total estimated taxes due in quarterly instalments?
Tedster, the CRA formula is pretty basic. It can take two years for changes to ripple through, and so you may indeed have years where you get a small refund in April. Their basic system is as follows:

The first two instalments (Mar/June) are simply half the instalments from the previous year since the notice is sent in Feb before the April tax return is in.

Then the last two instalment payments (Sept/Dec) make up the difference once the April tax return reveals the taxes.

That's it. It's that simple.

I have always paid instalments, and have come to the conclusion to never get creative and try and send in anything other than what they tell me to send in.

ltr
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Re: Tax Instalments

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AltaRed wrote
No idea what you just said.... You should simply accrue for your installment payments as presented to you by the gov't.
:oops: I guess I was not clear. If I accrue what they tell me, AND the RRIF remits what they must, then I should get the RRIF portion as a refund at tax time. According to many in this forum, that is giving the gov't (s) money for nothing.
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Re: Tax Instalments

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tedster wrote:AltaRed wrote
No idea what you just said.... You should simply accrue for your installment payments as presented to you by the gov't.
:oops: I guess I was not clear. If I accrue what they tell me, AND the RRIF remits what they must, then I should get the RRIF portion as a refund at tax time. According to many in this forum, that is giving the gov't (s) money for nothing.
What I was trying to tell you... is if you have been withdrawing in excess of RRIF minimums in past years, e.g. 2015, and have had some tax withheld in past years such as 2015, your future installment payments starting in Sept should now reflect that knowledge and no, you should not get a refund for that reason at tax time in April 2017.
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Re: Tax Instalments

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With interest rates so low the cost of over installing is likewise very low. In my opinion it is better to just pay them what they ask for to make sure you don't have to pay penalties. These penalties can be quite high in relation to today's interest rates. You can get caught if you realize cap gains or other unexpected income late in a tax year but haven't taken these into account for instalments. Much better to get a refund than have to pay a penalty for under installing.
Last edited by SQRT on 28 Apr 2016 04:59, edited 1 time in total.
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Re: Tax Instalments

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thanks to all, I was just rechecking and did not want to do the "wrong" thing.
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Re: Tax Instalments

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SQRT wrote:Much better to get a refund than have to pay a penalty for under installing.
:thumbsup:
and a tip of the hat to Shakespeare for his consistent quarterly reminders. 8)
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Re: Tax Instalments

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kcowan wrote:a tip of the hat to Shakespeare for his consistent quarterly reminders. 8)
+1

But you can relieve Shakes of this responsibility using something like Google Calendar. Set up 4 annually-recurring reminders. You can also set up notifications prior to each reminder, e.g. a month and a week in advance, so you have plenty of time to transfer cash in from HISAs and make payments to CRA. I'd imagine other calendar systems have similar features.
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Re: Tax Instalments

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I've got an easier system: I get a new mountain calendar each year and put it on the kitchen wall. Then I write down important dates on it. And it even works when the power is out or the internet is down. :lol:
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Re: Tax Instalments

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Shakespeare wrote:Then I write down important dates on it.
You have to do that 4x each year. I only had to do it 4x once a couple of years ago.
And it even works when the power is out or the internet is down.
Like the Eveready bunny Google keeps on reminding and reminding... [me and later my spouse, PSWs, heirs, etc.] long after I'm no longer able to send money to CRA myself ;)
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Re: Tax Instalments

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Bylo Selhi wrote:PSW
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Re: Tax Instalments

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adrian2 wrote:
Bylo Selhi wrote:PSW
Brings back memories...
Even older memories for me: Program Status Word (PSW) [from IBM S/360 architecture circa 1964.]
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Re: Tax Instalments

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SQRT wrote:With interest rates so low the cost of over installing is likewise very low. In my opinion it is better to just pay them what they ask for to make sure you don't have to pay penalties. These penalties can be quite high in relation to today's interest rates. You can get caught if you realize cap gains or other unexpected income late in a tax year but haven't taken these into account for instalments. Much better to get a refund than have to pay a penalty for under installing.
Good suggestion. Every year I try to estimate my income and my required tax installments, rather than using the CRA installment suggestions. Usually I'm pretty accurate, but the past 2 years I had some unexpected large capital gains, so my installment calculations were too low, and I had to pay interest penalties. Next year I'll just pay CRA's recommended installment amounts.
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Re: Tax Instalments

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Ditto

One year I got caught by estimating my installment payments too low. Since then I just pay what they ask.
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Re: Tax Instalments

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I pay what they ask and because the RRIF is also remitting taxes, I am over paying. So I try to remove that from the amount that I pay them.
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Re: Tax Instalments

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tedster wrote:I pay what they ask and because the RRIF is also remitting taxes, I am over paying. So I try to remove that from the amount that I pay them.
Yeah, it's a balancing act for sure to end up with zero owing when you finally do your taxes each year.

If you have fairly consistent income/tax withdrawn or clawed each year, then it's not too bad, but I find there's always something that throws a wrench into the works. The one thing I do know is to not get creative and decide you know better and not follow the instalment schedule that CRA has laid out. It's a recipe for penalty. Don't do it!

I mess around with the amount of tax taken from my CPP (pretty much all of it), and then combined with what they decide to clawback the OAS, along with about $1000 quarterly instalments, I shoot as a goal for less than $1000 owing at tax time. But it doesn't take much to throw that off. I'm still about 5 years from RRIF, so I see that as another screw-up in instalments in the future.

Tell me again why I worked so hard all my life to save for retirement so I can pay so much in tax, while I witnessed so many people I know who spent it all and now enjoy all sorts of tax benefits.

ltr
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Re: Tax Instalments

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ltr wrote
Tell me again why I worked so hard all my life to save for retirement so I can pay so much in tax, while I witnessed so many people I know who spent it all and now enjoy all sorts of tax benefits.ltr
I cannot, but if you know how they do it, will you share with me. PLEASE!
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Re: Tax Instalments

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This year DW had a couple of new streams of untaxed income, which would have taken her over the $3k tax owing threshold. I fixed that by moving all our donations to her return.
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Re: Tax Instalments

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Since retiring in 2002, I have managed to owe them money in 12 of 14 years by paying the recommended installments. During my employed life, owing to variable pay and bonuses, the same is true. I schedule the payments as soon as as I get the notice. So the reminders just make me assure enough cash in the accounts.

We still have overdraft protection (a rare luxury), but I hate paying extra fees.
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Re: Tax Instalments

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tedster wrote:I pay what they ask and because the RRIF is also remitting taxes, I am over paying.
That is a false reason; you are not overpaying because of that.
tedster wrote: So I try to remove that from the amount that I pay them.
Do it at your own peril.
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Re: Tax Instalments

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adrian2 wrote

tedster wrote:
I pay what they ask and because the RRIF is also remitting taxes, I am over paying.
That is a false reason; you are not overpaying because of that.

tedster wrote:
So I try to remove that from the amount that I pay them.
Do it at your own peril.
?? I really do not get why it is a "false reason"? They say pay 4k per quarter, so I pay that. At the same time the RRIF is sending them 1K. So if all they want is the 4 k< then I am over paying by 1K. No?

If I send them 3K and they get 1K from the RRIF, why am I at peril?
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