The CRA does not wait a year or more to collect GST from GST registrants who file and remit annually. Similar to income tax, GST filers are required to make regular payments throughout the year in four installments.

Who Has to Pay Installments?

Not every registrant is required to make quarterly payments. Those individuals who are sole proprietors or small business owners and owe more than $3,000 in net taxes in either the current year or the two previous years will be required to pay their personal income taxes during the year rather than all at once on April 30 of the second year. You will receive a formal letter when you owe more than $3,000 for the first time each year after filing your taxes. In order to determine the number of installments due, the CRA will rely on your most recent tax return and will send you reminders.

Calculating installment payments

Individual taxpayers' quarterly instalment payment requirements can be calculated using either remitting one-quarter of net tax from the previous year or estimating to pay one-quarter of net tax for the current year if such tax is expected to be less than the previous year. If estimates prove inaccurate, however, instalment interest may be charged. You may calculate your instalment payments in three different ways:

No-calculation Option

This strategy is only appropriate if you believe that your income will remain constant and not fluctuate.

Prior Year Option

Choosing this option is appropriate when your income in 2022 will be similar to that in 2021 but significantly different from that in 2020. This would be your best option if you had a strong year in 2021 but a weaker year in 2020.

Current Year Option

You may wish to consider this option if your business is expanding each year and you anticipate a significant increase in revenue. You can approximate your instalment payments by estimating your current year and using the calculation chart for 2022 instalment payments. If payment is not made in full by the due date, interest will be charged.

How To Make GST/HST Payments?

CRA offers online payment services through which you can pay your instalment at your financial institution or through your financial institution. You must enclose a remittance voucher if you wish to send CRA a check. Remittance vouchers are slips that inform CRA's computers what type of payment you have made and what account you have made the payment to. You could lose the payment without a voucher. As a first step, you should create a My Business Account with the Canada Revenue Agency so you can access your tax documents online. You could also contact a tax firm in Toronto that can handle all these matters for you so you can focus on your business practices.

Failure to make GST/HST installments

Interest will be charged if instalment payments are not made on time. Interest on instalment payments begins to accrue on the day after the instalment is due and ends on the earlier of: When an overdue instalment amount, along with any accrued interest, is paid; Net tax is due on the last day of the calendar year. An interest rate of 4% is charged on the overdue amount and the basic rate. An interest rate of 5% is currently in effect. Installation requirements are an unavoidable part of doing business. Assisting taxpayers in filing their tax returns and easing cash flow burdens at the end of the year, they help to ensure compliance. However, instalment payments must be made promptly, as interest is costly and non-deductible.

Final Words

The $3,000 threshold should be kept in mind when tracking your business finances. If your first fiscal year is shorter than 12 months, you may need to calculate whether GST/HST instalments are due. For more information about GST/HST payments, don't hesitate to contact us today. We handle all tax preparation and filing for our customers.