9 January 2009 External T.I. 2008-0287981E5 - Quarterly Instalment Remitting

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1(a). Whether the "first time" in respect of the requirement to pay income tax in quarterly instalment payments means the first time in the person's life as a taxpayer.

1(b). Whether the Canada Revenue Agency tracks the number of times an individual has exceeded the threshold for paying such instalments.

2. Whether an individual has to pay such tax in the last two quarters of the year, if the Canada Revenue Agency assesses the previous year's return later than the date when it sends out instalment reminders for that period.

Position: 1(a). The "first time" refers to the period where an individual has not received an instalment reminder in the previous 6 years. Thus, an individual who has not received an instalment reminder in the past 6 years and who was assessed net tax in excess of the threshold, would be considered as a first time remitter.

1(b). Yes.

2. Yes.

Reasons: 1. TOM 99(15) 4.32.; TOM 99(15) 6.3

XXXXXXXXXX 							2008-028798
								Lindsay Frank
								613-948-2227
January 9, 2009

Dear XXXXXXXXXX :

Re: Quarterly Instalment Remitting

This is in reply to your email in which you are seeking clarification regarding the requirement for an individual to pay income tax in quarterly instalments, as stipulated in section 156 of the Income Tax Act.

The clarification sought relates to two items, namely:

1. (a) Whether the "the first time" in respect of the requirement to income tax in quarterly instalments means the first time in the person's life as a taxpayer.

1. (b) Whether the Canada Revenue Agency ("CRA") tracks the number of times that an individual has exceeded the threshold with respect to paying such instalments.

2. Whether an individual has to pay such tax for the third and fourth quarters of the year, if the CRA assesses the previous year's return later than the date when it sends out the instalment reminders for those periods.

The concept of "first time" is governed by the CRA's internal administrative policy. In this regard, "first time" refers to the period where an individual has not received an instalment reminder in the previous 6 years. Thus, an individual, who has not received an instalment reminder notice in the past 6 years, and who was assessed net tax in excess of the threshold, would be considered as a first-time remitter. Please note that, for 2008 and 2009, the threshold is $3,000 for jurisdictions other than Quebec, where it is $1,800.

To determine whether an individual would be a first time remitter, the CRA keeps track of the number of times that an individual has had net tax in excess of the threshold. For instance, an individual who owed $5,000 due to a capital gain in 2003, who was below the threshold in 2004 and 2005, and who became self-employed in 2006 and exceeded the threshold in that year and 2007, would receive a first-time reminder in August 2008 requiring payment for September and December, provided that the 2007 return was assessed on time. If the return for 2007 were assessed later due to late filing, the taxpayer would receive a first-time reminder in February 2009, requesting payment for March and June of 2009.

With respect to the second item, the individual will not be exempt from remitting amounts due in September and December because the previous year's tax return is yet to be assessed. While the amounts to be remitted for September and December would normally be based on the assessment for the previous year (in this case 2006), if that return is not yet assessed, the amount to be remitted for each of those quarters would be based on the amount assessed as owing for the second preceding taxation year (in this case 2005), and would be equivalent to one-quarter of the amount for that year (2005).

An individual, who pays the amount suggested in the reminder notice sent in August, will not be charged instalment interest or penalty. However, an individual, whose assessed net tax for 2007 is over the threshold, and who pays nothing for September and December, will be assessed instalment interest and penalty.

We trust you find this clarifies the points you raised.

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Business and Partnerships Division
Income Tax Rulings Directorate