# Question regarding Owing tax



## supperfly17 (Apr 18, 2012)

I was wondering if someone could help or give me advice. I live in Ontario. I received mail where it said I had to make two instalment payments to the CRA for 1598$ on Sept 15 and Dec 15, 2914. I called CRA and they said I still owe around 3100$. I am puzzled as to how this is the case because when I received my assessment for 2013 tax year, my final balance was NIL. I work two part-time jobs, making around 40k in each.

Here it the notice of assessment I received from the CRA in May, and now I received that I still owe 3100$. I did my taxes in turbotax.

150 Total Income…….87,816
Deductions from total income….6,536
236	Net Income…..81,280
260	Taxable Income….81,280
350	Total federal non-refund credits 2,431
420	Net Federal Tax…..12,400
428	Net Ontario Tax…..6,077
435	Total Payable…..18,478
437	Total income tax deducted……15,281
448	CPP overpayment….1,617
450	Employment insurance overpayment…..740
486	Payment on Filing….838
482	Total Credits…..18,478
Balance from this assessment…..0.00
Final Balance……Nil

Thank You.


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## supperfly17 (Apr 18, 2012)

So I noticed that Total tax payable is 18478 and my tax deducted is 15281. What turbo tax did, was it gave me credit for CPP overpayment and EI overpayment as being part of tax deducted and thats why my tax owing payment was only 838. So I am still confused where this 3100$ is coming from that I have to pay?

On the CRA website it says regarding CPP overpayment "f you were not a resident of Quebec on December 31, 2013, and you contributed more to the Canada Pension Plan (CPP) than you had to (see line 308), enter the difference on this line. *We will refund the excess contributions to you or use them to reduce your balance owing.*


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## stardancer (Apr 26, 2009)

http://www.cra-arc.gc.ca/instalments/

The difference between tax owing (18,478) and tax deducted at source (15,281) = 3197. If this is the second year that you have owed over $3000 after deducting tax taken at source, then you have to pay installment payments for the next tax return, in this case 2014 taxes. CPP and EI overpayments do not count as credits towards calculating your installment amounts, even though you will eventually get them back as a refund or a credit towards taxes owing. It can be annoying, but if you don't pay the installments, CRA will charge you interest on them. Of course, CRA won't pay you interest on the CPP/EI overpayments.


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## supperfly17 (Apr 18, 2012)

stardancer said:


> http://www.cra-arc.gc.ca/instalments/
> 
> The difference between tax owing (18,478) and tax deducted at source (15,281) = 3197. If this is the second year that you have owed over $3000 after deducting tax taken at source, then you have to pay installment payments for the next tax return, in this case 2014 taxes. CPP and EI overpayments do not count as credits towards calculating your installment amounts, even though you will eventually get them back as a refund or a credit towards taxes owing. It can be annoying, but if you don't pay the installments, CRA will charge you interest on them. Of course, CRA won't pay you interest on the CPP/EI overpayments.


Thank you for this. It makes sense now. So for next year I could use the money that I overpaid for CPP and EI, and make my workplace deduct additional taxes instead.

I was confused initially I thought the instalments were for 2013 that I still owed money, but it makes sense that they are for 2014.


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## supperfly17 (Apr 18, 2012)

Another thing, why wouldnt the CRA just use my CPP and EI overpayment as tax paid? Since it is money in their pocket anyways since I overpaid it. When I do my taxes it is counted as if I paid additional tax.


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## gardner (Feb 13, 2014)

supperfly17 said:


> why wouldnt the CRA just use my CPP and EI overpayment as tax paid?


They do, which is why your only had to actually pay $838. The problem is that the CRA cannot work out how much they have been paid as you go through the year, and they refuse to wait until the year-end accounting to work out if they have all their money, and get it, if they don't. Thus installments.

I believe that if you KNOW that you will have enough deducted at source to keep the final due vs. deducted amount under $2K for the coming year, you can send them a letter to say that. But if (1) they ask for installments, (2) you don't pay them, and (3) at the end of the year you owe them > $2k, there WILL be trouble. If you are at all uncertain whether your tax deducted at source will cover the final tax owing, then paying the requested installment is your only course.


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## supperfly17 (Apr 18, 2012)

So I am 100% that for 2014 my difference will be less then 3000$. It will be about 1300$. Am I able to call CRA up and ask to waive the instalment payments because I am sure the difference will be under 3000$? Do I have that right? Would they do that?


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## Turnip7 (Mar 9, 2014)

supperfly17 said:


> So I am 100% that for 2014 my difference will be less then 3000$. It will be about 1300$.


"Who has to pay by instalments?

You have to pay your income tax by instalments for 2014 if your net tax owing is more than $3,000:
in 2014; and
in either 2013 or 2012."
http://www.cra-arc.gc.ca/E/pub/tg/p110/p110-e.html

So if you are sure that net tax owing (see definition in pamphlet) will be less than $3000 for 2014, just ignore the notices. And pay the balance owing when you calculate your 2014 return.


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## gardner (Feb 13, 2014)

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/rdc-eng.html



> You can reduce the amount of your instalment payments, or you may not have to make instalment payments at all, if you reduce your net tax owing.





> Example
> 
> Hugh now estimates his net tax owing will be $500 for 2014. Based on his estimate, he does not have to make instalment payments in 2014 because his net tax owing will not be over $3,000 for 2014. Hugh would disregard the instalment reminders he gets for 2014.


You can be "Hugh" from the example. Call up the CRA and put it to them that this is your intent and see what they say.


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## OptsyEagle (Nov 29, 2009)

Just don't pay the installment. No need to phone anyone. If you are right about your estimate there will be no problem. If you are wrong they will charge you interest on the money from the time the installment was due.


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## supperfly17 (Apr 18, 2012)

OptsyEagle said:


> Just don't pay the installment. No need to phone anyone. If you are right about your estimate there will be no problem. If you are wrong they will charge you interest on the money from the time the installment was due.


Do you happen to know how much interest they charge?


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## heyjude (May 16, 2009)

Let me Google that for you:

http://www.cra-arc.gc.ca/interestrates/

The answer is 5%.


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## supperfly17 (Apr 18, 2012)

Thank you very much.


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## heyjude (May 16, 2009)

You're welcome. If you explore the Revenue Canada site I think you will find that it is relatively easy to find information such as this. The Search function helps.


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## domelight (Oct 12, 2012)

supperfly17 said:


> So I am 100% that for 2014 my difference will be less then 3000$. It will be about 1300$. Am I able to call CRA up and ask to waive the instalment payments because I am sure the difference will be under 3000$? Do I have that right? Would they do that?


CRA can requiret installments if you owed in excess of 3K in two of the last three years. (this is before cpp overpayment, WITB benefit, gst employee rebate etc. are calculated)
if at the end of the year you owe them anything they will charge an annual interest rate of 5% calculated daily from the time the installment was due.
--so if you believe you will owe about 1,300. then send them $650 for each of the two installments. Sept & Dec. Ah wait problem is CRA asked for 3,000 which equals $750 per quarter. so if you don't send 750 for the first pymt and then 550 for the second they will charge you interest. Oh Wait again further yet this is probably first year of installments for you so you gotta catch up and pay 1,500 each sept & Dec. based on 3k owing in 2013. So specific to you if you think you will owe 1,300 in 2014. then you need to pay all of it in sept. to avoid interest because CRA asked for 1,500
--even if you sent them nothing and owed 50 dollars at year end they will charge you interest on the 50 because you didn't make an installment. However if you remit the appropriate installment and still owe more. Than no installment interest is charged.
--The next year 2015 will average out to four installments 25% of 2013's payable for the first two and then (2014 payable - first two installments made in 2015 and then divided by two = the last two installments to be made in the 2015 calendar year for the 2015 taxation year.)

--if you don't pay the installments they charge you interest no big deal, just pay up by april 30 and its no problem. That being said are you borrowing on line of credit at a higher interest rate than 5% ????
--do you have investments you would otherwise make that grow by at least 5% ????
--sometimes its just way simplier to forget the installments and pay cra their 5% but if you got the cash then save the interest....


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