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Navigating Quarterly Payments for Freelance Taxes in Canada

If you’re a freelancer or an independent contractor, you may have to send quarterly tax payments to the CRA. Don’t be intimidated. The process may be easier than you think.

Who Has to Pay Quarterly Income Taxes?

As of 2023, you must pay quarterly income taxes if you anticipate owing more than $3,000 at tax time. For residents of Quebec, the threshold is only $1,800. But, you only have to make quarterly payments if you owe taxes in at least one of the two previous years. This means that if this is your first year owing income taxes, you get a freebie in other words, the CRA doesn't assess penalties if you wait to pay until you file your return. 

For fishers and farmers, the rules are slightly different. You should also pay if you anticipate owing over $3,000 or over $1,800 in Quebec, but you only need to pay if you owe taxes for both of the last two years. Essentially, that means that farmers and fishers get two “freebie” years where they don’t have to pay until the end of the year.

How Do You Calculate Quarterly Tax Payments?

If you owe income tax last year, the CRA sends you a reminder, and you can simply pay the amount noted on the reminder. That amount is based on how much you owe over the last couple of years. If you think that your current year’s income is closer to last year but markedly different than the previous year, you should calculate this year’s payments based on last year’s numbers, use the CRA’s calculation chart for the current year.

You should also use this chart if you want to base your payments on your estimated income for this year. The chart works you through taxes, credits, Canada Pension Plan contributions, and Employment Insurance premiums, and it advises you on how much to pay.

When Do You Make Quarterly Payments?

Generally, quarterly payments are due on March 15, June 15, September 15, and December 15. If those dates fall on a weekend or holiday, the payments are due the next business day. The CRA only sends out two reminders per year in February and August, but if you think you need to pay and you don’t get a reminder, you should still submit your payment.

How Do You Pay Quarterly Income Taxes?

As indicated above, if you receive an installment reminder, you can simply write a check and send it back with the slip included with your reminder. Otherwise, you can set up an automatic payment from your bank account to the CRA. 

You can use a debit card or credit card to make a payment through a third-party payment processor. If you bring your remittance slip to your bank, you can pay there, but if you’re paying more than $25 million, make sure to call ahead you need to make special arrangements for payments that large.

If you are supposed to make quarterly payments and you don’t, the CRA will charge some penalties and interest. If you make quarterly payments, remember to note them on your annual tax return so you get credit for them. You don’t want to accidentally pay twice.

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