The CRA installment schedule assumes your income and deductions will be the same from one year to the next. It also assumes the entities which are withholding taxes will continue their withholding the same way. Therefore, you cannot deduct withholding taxes from the required amounts, or if you do, you do at your own risk of underpaying.tedster wrote:?? 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?
Using totally made up numbers:
- in 2015, withdraw $40k over minimum from RRIF, $12k withholding tax, $100k total income from all sources, $16k net tax payable in April 2016.
- CRA send you installment reminders to pay 4 quarterly installments of $4k
- in 2016, withdraw again $40k over minimum from RRIF, $12k withholding tax, $100k total income from all sources.
- if you did what you're suggesting, you would have subtracted the withholding tax of $12k from $16k and paid just $4k in installments, ending up with $12k net tax payable in April 2017
- oops, CRA slaps interest and penalties because you owe them more than $3k and you chose not to follow the prescribed numbers.