Increase the Quarterly Tax Instalment Threshhold: 71% Say Yes

The next quarterly tax instalment deadline is December 15.   Surprisingly, almost 30% said no to Knowledge Bureau’s November’s poll question, which asked: “Canadians who have net tax owing of more than $3,000 for 2015 and in either of 2014 or 2013 must make quarterly income tax remittances. Should this threshold be increased?”

Advisors are reminded that for farmers and fishers, the annual instalment requirement falls on December 31.  Calling clients now to estimate quarterly or annual instalments to ensure only the correct amount of tax is paid for 2015 is an important part of year end planning.  Those who have paid enough will appreciate the extra money for Christmas, or to leverage opportunities to top up RRSPs, TFSAs, RESPs or charitable donations.

Planning was not high on the agenda for respondents to the poll; rather the issue that garnered attention was cash flow.  A substantial majority of the 185 who voted (71.35% or 132 votes) agreed that, yes, the $3,000 threshold should be increased. Just 53 people (28.65%) said no to raising the limit.

There were fewer comments on this issue than are usually elicited by our poll questions, but most who did offer feedback gave ample rationale. The explanations ranged from keeping our tax system as efficient as possible to not putting undue pressure on the cash flow of taxpayers, as well as taxing their income. Following are some of the comments we received on the topic:

For the no side:   “Individuals with employment income are subject to immediate payment of tax at source; why should anybody else be treated differently? Those with investment income should have a 20 to 25% withholding tax at source; those with self-employed earnings remit 25% of their previous year’s taxable self-employed earnings, on a monthly basis. Those receiving CPP, OAS, and RRIF income, complete a form similar to a TD1, with tax deductions at source. It is so simple when everyone works together, rather than bending over backwards for those wanting preferential treatment.”—Ken

“If you want to avoid paying instalments throughout the year, calculate your estimated taxes and make one installment in December. For those who are not as disciplined about preparing for the taxman, then quarterly installments make sense, and the $3,000 limit is more than reasonable.”—Rosalind

“I’d be cautious about raising the limit before installments are required. For many taxpayers, it’s a lot easier to make four smaller payments over the year than one large one the following April. Not everyone has quick access to ready cash.”—Jo

For the yes side:  “The limit should be increased up to $5,000 or even $10,000. A lot of boomers who retire may have substantial RRSP savings in addition to their pensions and may wish to start liquidating their RRSPs before the age of 72, when they have to be converted to a RIF.  Quarterly instalments do not make sense if they amount to paying your taxes before they are due.”—Brian

“This needs to be revised to a higher level. With income splitting for seniors, the net tax owing can rise without the person(s) involved being aware. Personally I would rather save my money and pay it all off rather than giving money to CRA in such a situation.”—Gail

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