AFM362 Lecture Notes - Lecture 12: Remittance
28 Jun 2018
School
Department
Course
Professor
If the difference between the total tax liability (net tax owing) in the current year AND one of the two preceding years exceeds the amount of tax withheld at source
by the instalment threshold, then, quarterly instalments must be paid. That threshold is $3,000 ($1,800 if resident in Quebec)
•
Instalment threshold
One quarter of the estimated tax payable in the current yearâ—‹
One quarter of the instalment base (defined as tax payable excluding the effect of certain tax credits) for the PY (preceding year)â—‹
One quarter of the instalment base for the second PY for the first two instalment, then one half of the instalment base for the PY net of half of second PY paid
already.
â—‹
Instalments paid 15th of each calendar quarter (march, June, September, December), with the balance of tax due the following April 30. Each instalment is computed
as the least of:
•
Instalments can continue to be based on the estimated liability for the year but will be subject to interest penalties if estimates are too low•
Instalment amounts and timetable
The Act charges interest on deficient and late instalments from the day the instalment should've been made to the day the final payment of tax is due (e.g., April 30
for individuals)
•
Instalment interest offset on prepaid or overpaid can be applied against instalment interest owing, it's not refundable and can't apply to other debts•
Interest is calculated from the date the final payment is due until the amount is paid.•
Interest on deficient or late instalments
See exhibit 14-1 on page 854
Corporations
A private corporation is permitted to reduce its monthly instalments by 1/12th of the corporation's dividend refund on the payment of dividends for the year•
A corporation is not required to make instalments if tax payable for the current or preceding year do not exceed $3,000•
The provision allows a corporation to avoid paying non-deductible arrears interest for a period for which refund interest is being calculated in the corporation's
favour
â—‹
The offsetting of interest on corporate tax overpayments and underpayments is permitted •
Instalment threshold and interest consideration
Eligible CCPC may pay quarterly instalments due on the last day of each quarter of the CCPC's taxation year•
Has taxable income in current or previous taxation year not exceeding $500,000 and taxable capital employed in Canada for the taxation year not over
$10,000,000
â—‹
A small business deduction was claimed in computing the corporation's income tax payable for either current or previous taxation yearâ—‹
The corporation has a "perfect compliance history"â—‹
A CCPC will be considered to be an eligible CCPC if:•
Perfect compliance history means throughout the 12 months period before the quarterly instalment is due, it has no compliance irregularities pertaining to remittance
of tax and filing of returns under the Income Tax Act or whatever Act
•
Four instalment equal to a quarter of estimated tax payable for the current taxation yearâ—‹
Four instalment equal to a quarter tax payable for PYâ—‹
A first instalment equal to a quarter of the tax payable for the second PY and three instalment equal to 1/3 of the amount by which the tax payable for the PY
exceeds the first instalment paid for the current year
â—‹
Eligible CCPC has three options•
Quarterly instalments for eligible CCPC
This is for corporations that are not eligible small CCPCs•
1/12 of the estimated tax liability calculated at current rates on the estimated taxable income for the current yearâ—‹
1/12 of the instalment base for the immediately preceding taxation yearâ—‹
1/12 of the instalment base for the second PY for the first two months, then the next ten months 1/10 of the PY instalment base minus the amount paid in
instalments for the first two months
â—‹
Compute the instalment on the least of the following:•
Monthly instalment for other corporations
Minister needs to determine refund for any overpayment of tax•
The minister may pay the refund upon assessment but must pay it upon application in writing by the taxpayer within the normal reassessment period•
Minister may apply refund to the taxpayers other tax liabilities if available •
The day the overpayment aroseâ—‹
For individuals, 30 days after the balance-due day for the year, which is April 30 of the following yearâ—‹
For corporations, 120 days after the end of the taxation yearâ—‹
Where the return was filed after the filing due date, 30 days after the date the return was filed for individuals, and the day the return was filed for corporations â—‹
Interest compounded daily at the prescribed rate in exhibit 14-1 is paid in most cases on overpayments of tax from the latest of:•
Refund and interest
Rights of the taxpayer
One year after the filing-due date of the taxpayer for the yearâ—‹
90 days after the day of mailing of the notice of assessment â—‹
A notice of objection is filed within 90 days of the mailing of the notice of assessment. The due date for the notice of objection for individuals and a graduated rate
estate is the later of:
•
Objections and appeals
Avoid interest charges if you choose the second or third option to pay instalments
Interest is charged on unpaid penalties from the date the tax return was due.
when the payment is made •
When the reminder of tax payable should be paid (e.g. April 30 for individuals)•
Interest is charged from the time when the instalment payment was due to the earlier of:
Refund paid back to corporation is 1%
Refund paid back to non-corporation is 1+2%
Refund charged on unpaid tax and instalments is 1+4%
CRA's net worth method:
Net worth this year - net worth previous year + personal/living expenses - windfalls
AFM 362 Page 2
Document Summary
That threshold is ,000 (,800 if resident in quebec) Instalments paid 15th of each calendar quarter (march, june, september, december), with the balance of tax due the following april 30. Each instalment is computed as the least of: One quarter of the estimated tax payable in the current year. One quarter of the instalment base (defined as tax payable excluding the effect of certain tax credits) for the py (preceding year) One quarter of the instalment base for the second py for the first two instalment, then one half of the instalment base for the py net of half of second py paid already. Instalments can continue to be based on the estimated liability for the year but will be subject to interest penalties if estimates are too low.
