Are you no longer eligible to make quarterly instalment payments?

When a corporation has paid quarterly instalments and ceases at any time in a tax year to be eligible to pay quarterly instalments, the corporation is still allowed to pay its next instalment due at the end of the current quarter; however, the corporation will have to begin to pay monthly instalments following that quarter.

Example

This example shows how to calculate the required instalment amounts when a corporation is no longer eligible to make quarterly instalments.

Estimated tax payable for the current year: $120,000

Divided by 4

Quarterly instalment payments: $30,000

A corporation ceases to be compliant on May 31, 2021. It is allowed to pay its next instalment due at the end of the current quarter, which is June 30, 2021. The corporation will have to begin paying monthly instalments starting on July 31, 2021.

The first two instalment payments of $30,000 are due quarterly on March 31 and June 30, 2021.

The number of months remaining in the tax year after June 30, 2021, is six.

Formula to calculate remaining monthly instalment payments:

Estimated tax payable for the current year minus total of all instalment payments due quarterly while eligible, divided by the number of months remaining in the tax year

[$120,000 - ($30,000 x 2)] ÷ 6 = $10,000

Therefore, six monthly instalment payments of $10,000 are due on July 31, August 31, September 30, October 31, November 30, and December 31, 2020.

Note

You can also base this calculation on the first instalment base; however, you have to add to your monthly payments any estimated Part VI and XIII.1 tax payable for the current year, divided by the number of months remaining in the tax year. In general, the first instalment base is the previous year's tax payable and the second instalment base is the tax payable for the second preceding year [Regulation 5301].

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