Plan Now To Eliminate December 15 Instalments

Now is the best time to discuss whether the December 15 quarterly instalment will be necessary for clients who previously met the profile. Farmers, who must make one instalment on December 31 should be especially careful. The prairie rainfall wiped out many crops and it is quite possible a reduced or no tax instalment will be required this year. CRA's billing system, however, may tell a different story.

Any professional advisor and their clients will avoid overpayment however by completing an estimation of 2010 income and collaborating with financial advisors to maximize RRSP contribution room to get the results needed to avoid the payment.

To help, CRA released a new version of "Paying Your Income Tax by Instalmentsî (Publication number P110) on November 18. This is a great resource for information on instalment payment amounts, remittance schedules, how to reduce required instalment obligations and interest and penalties for late or missing payments.

In the past, tax instalment calculations include net tax owing and CPP payments on earnings. Voluntary E.I contributions for the self-employed on line 430 are now part of the formula as well. The complete publication is available:

http://www.cra-arc.gc.ca/E/pub/tg/p110/README.html

ADDITIONAL EDUCATIONAL RESOURCES: Essential Tax Facts, 2011 and Introduction to Personal Tax