As a sole proprietor should I be making tax installments?

6 April, 2014

You are working away building your business, trying to manage the day-to-day operations.  Cash is flowing in and out, you are paying bills and feeling like you are moving ahead.  Then all of a sudden a tax bill is dropped on you…what now????  If your net tax owing when you filed your last income tax return exceeded $3,000, you may be obliged to make quarterly instalments toward your next year’s tax bill.

The majority of Canadians don’t have to make quarterly instalment payments toward their income taxes because their employer’s deduct sufficient tax at source throughout the year to cover their tax bill.  If you are self-employed, then you need to think about making regular installments.  Complexities start when you supplement your income with other types of funding such as income from investments or withdrawals from RRIF’s. 

Some of the questions you may be asking:

  • ·         Are you wondering how much you should be paying? 
  • ·         When do I make the installments?
  • ·         Is it against the law or are there any repercussions for not paying quarterly?
  • ·         Will I be charged interest if I don’t make installments?
  • ·         What happens if I overpay? 

There are many rules, regulations, and requirements that a sole proprietor must follow and it is important that you completely understand your options.  You don’t have time to read the legislation and interpret it then you need an accountant to help you manage your taxes.  Contact your local Mississauga Accountants at Numbers Plus to help you develop your tax strategy.  Contact us today.

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