Forced to pay installments despite net refund as a couple | Income tax filing | Discussion forum

MattS said
I toss this one out there. when we file we file as a couple. On a net basis were owed a refund of about $2000 every year.
They want one of us to pay by installment as one owes quite a bit and one gets a sizable refund.
As CRA owes money on a net basis, I asked if we could not pay installments because I don’t need a $15,000 refund at the end of the year and it’s troublesome to work with two people’s payrolls at work to make special arrangements.  

I don't know why it would be troublesome to having withholdings adjusted. I have done that and it's about two minutes filling in a form.

CRA only sets up instalments if you paid over $3000 for the tax return you filed. I paid $4000 last year so got hit with instalments. I guess I could set up pensions to take taxes off … but the longer I can hold onto it and make interest… all the better for me.

Can’t you some how split the income between the 2 of you?

GIC-Fanatic said
CRA only sets up instalments if you paid over $3000 for the tax return you filed. I paid $4000 last year so got hit with instalments. I guess I could set up pensions to take taxes off … but the longer I can hold onto it and make interest… all the better for me.

Can’t you some how split the income between the 2 of you?  

One can only split so much, e.g. pension income splitting, spousal loans that are in place, spousal RRSP contributions, and on the expense side, there is ability to aggregate charitable donations to highest income earner, and medical expenses to the lower income earner. Beyond that, it is making the most use one can of increasing (or decreasing) source deductions.

In our case, it is a matter of increasing source deductions for CPP and RRIF withdrawals to bring the April balance owing down and/or to adjust installment payments. I could also make more effort to have more source deductions on my DB pension payments to bring my quarterly installment payments down but given the size of my quarterly installment payments, there is no way I have the means to eliminate them. My spouse gets dinged with installment payments due to pension income splitting from me. It is what it is.

Post #1 is fails to recognize our ITA is set up to tax individuals, not couples as in a joint filing that one can do in the USA. There is no such thing as a joint filing in Canada. There is only the ability to reduce tax burden as noted in my first para of this post. There will thus always be a settling of each tax account for a tax year in April following. It is what it is.

I suspect CRA would like to find a better way if they could but they don't have the means to know what each taxpayer necessarily will have for all components of taxable income, or deductions and credits, for each taxation year. Only the taxpayer can mitigate the size of refunds or balances with installment payments.

As an example, per https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/individual-income-tax-return-statistics.html to Aug 10, 2025, CRA paid out $43.6B in refunds this T1 tax filing season and collected $63.7B in balances owing. I suspect they would be the first to want to see those numbers come down AND become more even.... not disparate by $20B in taxation paid late. CRA, in effect, was 'losing' by not collecting more of that $20B earlier.

Our tax system is what it is. There is not much that can be done without the political will to change it with an ITA overhaul.

I don't see how the need for withholding adjustments, which is not particularly onerous, means that "Canada is broken." In fact, I can't even fathom what that phrase means except that someone is pissed off.

When did CRA start this new installment payment process? I have received an email stating to pay 7k+ in Sept and Dec 2025.
I had paid a tax of 9k+ in 2023 and did not receive any installment reminders in 2024?
Is it something new?
Is it if you exceed some threshold of last paid tax of 10k+?

Thanks for the inputs.

I've been paying installments for years through my online biller, i just made one a couple weeks ago as I pay early. I hope they don't take that payment feature away because its so easy and free to pay that way.
I often don't follow the no calculation method and i miscalculated and I got charge interest so now I give them extra money to make sure.

@AltaRed:
How about instead of paying the installments, I put the same 15k in RRSP and reduce my taxable income for the current year, estimating that this will reduce my income tax owed and make it below $3k for 2025.
Will this work and will result in me paying no penalty for the year 2025?
Thanks

A RRSP deduction is a 'deduction at source' so that should work (operative word being 'should'). However, one would want to be sure they will fall below the $3k balance owing threshold doing that, so careful modeling would be required. If even $1 over that $3k, an interest charge and possibly penalty would levied on 2025 installments not made. I would overcompensate by a rather comfortable amount.

In effect, you would be applying the 'current year' option as described here https://www.canada.ca/en/revenue-agency/services/payments/payments-cra/individual-payments/income-tax-instalments/options-calculate.html In this option, you are calculating that your 2025 tax owing will be lower than in 2024 (and falling below the $3K threshold).

Note you do not have to tell CRA which option you are using but you may want to make token installment payments that would signal to CRA what you are doing, i.e. current option because 2025 tax owing will be considerably less.

From my 'big picture' perspective though, I have never had an issue paying installment payments. The time value of money between Sept 15 and Dec 15 payments and that which would be otherwise paid by Apr 30th is next to nothing at today's HISA rates, and especially on an after tax basis.

I have my quarterly installment payments set on automatic, i.e. pre-authorized debit. CRA just pulls the funds from my bank account on the 4 dates.

I never had much opportunity to contribute to a RRSP due to contributions to a Defined Pension plan that, through Pension Adjustment, gave me zero RRSP contribution room. That said, in the early years when I could, I did contribute to an RRSP.

I see your decision as two separate things. You contribute to a RRSP because you want too, not because it could zero out the need to make installment payments. That latter point is a minor bonus from my perspective.

There is nothing inherently wrong in making installment payments other than the nuisance of doing so on a quarterly basis.