Example of instalment interest and penalty calculation
This is an example of how we calculate instalment interest and penalty using the offset method.
Corporation D has a December 31 year end and has to make monthly instalment payments of $75,000 starting in January 2018.
Corporation D only makes two instalment payments in the year. It makes one payment of $120,000 on March 12 and a second payment of $150,000 on April 25.
Therefore, when we assess Corporation D’s return, we will charge $16,101.00 in instalment interest. We used an underpayment interest rate of 5% compounded daily in the following calculation.
The total instalment interest we will charge Corporation A on its balance-due day of February 28, 2019 is $16,101.00.
Based on Corporation D's instalment interest of $16,101.00, we will assess a penalty of $4,484.12 as follows:
|Minus the greater of: $1,000, and 25% of the instalment interest charged if Corporation A had made no payment at all ($28,531.05 × 25%)||
|Instalment penalty (one-half of the difference)||$4,484.12|
Forms and publications
Report a problem or mistake on this page
- Date modified: