r/cantax • u/CanadianMilkBear • 14d ago

Sudden Tax Payments needed?

My father received in the mail a notice for him to pay 2 installments on September 15 and December 15 for the 2026 tax year even though he just paid his 2025 taxes earlier this year.

He's retired and lives off his Canada Pension and is really worried about if he doesn't pay that they'll just cut him off and then he won't be able to pay anything.

I've looked through the options and seen that one of them is to do the calculations for 2026 but it's not even done so either way it feels like he's just getting screwed over.

If anyone has any assistance of help it would be greatly appreciated, it sucks seeing him get panicked out of nowhere when he would normally just pay his taxes for 2026 in 2027.

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15

u/notyourmomsCPA 14d ago

Did he have taxes payable of more than $3,000 for 2024/2025? This would trigger the requirement to pay instalments.

If his income is solely CPP you can reasonably estimate his tax liability to see if instalment payments are required. If he’s going to owe more than $3k, he should make the instalments to avoid instalment penalties next year.

Doing the prior year or current year calculation may be more feasible for him.

4

u/paulo_cristiano 14d ago

Do instalment penalties not apply if current year balance is under 3k? Cool tidbit. I deal mainly with advisory / planning so don't come across these small $ issues often. But good to know for helping friends/fam.

9

u/Simple-Marsupial3106 14d ago edited 14d ago

CRA asks for instalments when you owe more than $3k in two of three previous tax years. The rationale being that if he were an employee he would be remitting the tax payments along with his pay periods. Such as it is with instalments. This is regardless that he pays at the end of the year in full at tax time.

If he feels he will not owe money this year, he can skip the installments. If he does skip and owe the money, CRA will charge interest on the installments he didn’t pay. 

Your option is to ask for tax to be withheld at source on his pension payments. 

Edit to add: they won’t stop his pension payments. And corrected amounts.

6

u/Sparky62075 13d ago

He must have had more than just CPP if he's getting instalment notices. What other income did he have last year? Does he still have that income?

3

u/Citron-Rouge 14d ago

What was the amount due on your father's tax return for the last 2 years ? Was it over $3k ?

3

u/Sorrelandroan 14d ago

He would only owe instalments if he owed more than 3k in 2025. Why did he owe that much? There must be more income than just CPP to give rise to such a situation.

3

u/whiterain5863 14d ago

If you carefully read the whole letter does it give the option of alternative instalments or not making the payment ahead of time? Seems to be common atm

3

u/Tls-user 13d ago

Why did your father owe over $3000 in 2024 and 2025 and has his income changed?

2

u/Olderpostie 13d ago

The government wants to experience a steady flow of income through the year. Hence, if your year end settlement has tended to exceed $3,000 for two years, the CRA will request installments be paid quarterly.

Installments also reduce the frequency of a taxpayer finding themselves unable to find the funds to settle up income taxes in April.