I had my taxes done by H%26amp;R block - and since basically, I am a contract worker with an employment agency, but the way it works is that I am technically self-employed and are billing them for hours. So they only took off CPP and EI and not taxes on my paycheques.
So I get a T4 slip and a business expenses form. When I had my taxes done, H%26amp;R block says I am eligible to make installment payments, June, Sept 2007 and March next year. Since I went over $2500 in tax.
Does anyone know if the tax installment thing applies to "self-employed" guys like me? Or do I have to pay by April 30th?..??? Yikes!
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HI JJ...the tax scenario that you have described sure doesn't sound right to me, and I will explain why.
Firstly, if you are self employed, you are EXEMPT from paying EI outright.
If a company is paying you and withholding CPP and EI, they are also required to withhold the necessary federal and provincial taxes.
It is entirely possible that your income per pay period fell below the thresholds of the company being required to withhold federal and provincial taxes.
Very simply stated, if you made less than $8,839.00 federally and less than $8,377.00 in the province of Ontario, your employer would not have been required to withhold and remit any taxes from you whatsoever.
You didn't indicate whether you had more than 1 T4 slip during the year, because if you do have more than one employer, chances are you would end up owing taxes at April 30, 2007 of each year.
Before you start sending in taxes on a quarterly basis on the assumption that you are self employed, I would contact CRA's general enquiries at 1-800-959-8281 and explain the lack of tax deductions from this employer on the T4 slip in question.
Based on the fact that the company you worked for deducted CPP and EI, they should have also deducted taxes, and failure to withhold and remit the correct amounts is a very serious issue.
You are welcome to email me through yahoo answers if you need further assistance on this matter.
I hope this information helps you.
EDIT @ 10:10 AM MAY 3, 2007
Hi, JJ, I just read your additional notes, thank you.
I have looked this up on CRA's website, and I decided to contact CRA business enquiries directly on this one.
I just got off the telephone with CRA business inquiries at 1-800-959-5525, I spoke with a gentleman in the Toronto North Office.
On the T4 slip that you received from the agency, there should be a box 81 showing the amount of income you received from the agency. This needs to be reported on a T2124 Statement of Business Activities, which you indicated you also received from the agency.
With respect to the taxes, you are correct, the agency is NOT required to withhold taxes, which is a rarity when CPP and EI are being deducted, and you are responsible for remitting the taxes on a quarterly basis to CRA for 2007 based on what your taxes were in 2006. This is the case when the annual taxes due are in excess of $2,000.00
Now, if you prefer, you can complete a TD1 form for the agency and have them deduct a specific amount of tax from each payment you receive.
The TD1 form can be downloaded from CRA's website:
http://www.cra-arc.gc.ca/E/pbg/tf/td1/RE...
If you look at page 2 of this form, there is a paragraph titled "ADDITIONAL TAX TO BE DEDUCTED". Depending on how frequently you are paid by the agency, you can decide how much additional tax to have the agency deduct from your paycheques.
If you are paid monthly, and let's say your 2006 taxes were $2,400.00, then you should have at least $200.00 tax deducted from your "employer".
With respect to 2006, I would strongly recommend sending CRA a series of post-dated cheques for equal amounts for the estimated arrears with interest, and hopefully CRA will accept your postdated cheques in good faith as your promise to pay your outstanding CRA account for 2006.
It's unfortunate that you didn't get any tax advice throughout 2006 on your very unique tax situation, so that you would have been better prepared to manage your tax affairs during the year, and not end up owing a bundle at April 30, 2007.
My advice to you is to keep 2007 payments totally up to date, and as far as 2006 taxation year goes, the damage has already been done, just try to pay off the arrears to CRA as promptly as you can as I suggested above.
I hope this information helps you, and if you need further assistance, you are welcome to email me through yahoo answers.
Reply:Yes, you should pay the installments. It isn't a matter of eligibility, it is a requirement.
Per CRA:
Who has to pay by instalments?
You have to pay your income tax by instalments for 2007 if your net tax owing is more than $2,000:
in 2007; and
in either 2006 or 2005.
http://www.cra-arc.gc.ca/E/pub/tg/p110/p...
Reply:LOl You can make arrangements with those nice people and work out a payment play. I do highly suggest you contact them before THEY make their very own unique pay back options. Good luck
Reply:An instalment plan is payment for the next years taxes in advance.
You will owe the $2500 for the current tax year(2006) and any instalment payments you make will be for the 2007 tax year.
CRA "allowing" you to be eligible for instalment payments happens to anyone who owes more that $2500ish per year. You do not have to participate, I would recommend you put money aside in a high int erst saving account for the next tax year payable.
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