CRA instalments: who actually has to pay (and who can safely ignore the reminder)
The CRA sends instalment reminders to anyone who crossed a line on a past return. Whether you actually owe quarterly payments comes down to one number — net tax owing — and a two-year test most people have never heard of.
Getting a CRA instalment reminder doesn't mean you owe instalments. The reminder goes out automatically based on your past returns. Whether you actually have to pay comes down to a two-part test — and one number on it is about your current year, which the CRA can't see. You can.
The two-part test
You must pay instalments for 2026 only if both are true:
- Your net tax owing for 2026 will be more than $3,000 ($1,800 if you live in Quebec on December 31), and
- Your net tax owing was over that same line in 2025 or 2024.
Fail either part and you can put the reminder in a drawer. No form to file, no box to tick — you just don't pay, and nothing happens as long as your 2026 return comes in under the line.
What "net tax owing" actually means
It is not your total tax bill. It's what's left after everything withheld at source — payroll deductions, tax held back from RRIF or pension payments — plus, for instalment purposes, self-employed CPP contributions and any voluntary EI premiums.
That distinction is the whole game. Someone earning $200,000 on salary with proper withholding has net tax owing near zero. Someone earning $60,000 of untaxed rental and freelance income blows past $3,000 easily. Your take-home pay breakdown shows how much tax your income level generates — anything no one is withholding is what piles up in this number. The instalment calculator runs the two-part test on your three years, and will estimate net tax owing from your income sources if you don't already know it.
Who gets caught
- Self-employed workers — no employer, no withholding, the classic case.
- Landlords and investors — rent, interest, dividends, and capital gains arrive gross.
- Retirees with several income sources — CPP, OAS, a RRIF, maybe a pension. Each payer withholds a little or nothing, and together they come up short. This is the fastest-growing group on the instalment rolls.
- The one-time capital gain crowd — sold a rental or a chunk of stock in 2025? That single spike can trigger reminders for 2026 even though the gain won't repeat. You may still escape: if your 2026 net tax owing stays under $3,000, part one of the test fails and you owe nothing quarterly.
The reminder is a forecast built from your past. The test is about your present. When the two disagree, your present wins — you just have to be right about it.
The 7% reason to take the test seriously
If you do meet both parts and skip the payments, the CRA charges instalment interest at the prescribed rate — 7% as of the third quarter of 2026 — compounded daily from each missed due date. Let the interest pass $1,000 and a penalty stacks on top. Guessing wrong isn't catastrophic, but it's a guaranteed loss at a rate your savings account won't beat.
What to do with the reminder
- Estimate your 2026 net tax owing. Total tax minus what's being withheld. Be honest about the untaxed income.
- Under $3,000? Document your math and ignore the reminder.
- Over it — and over it in 2024 or 2025 too? You're in the system. Your next read is the three ways to calculate what to pay — one of them carries a zero-interest guarantee.
- Retirees: often the cleanest exit is asking your RRIF or pension payer to withhold more at source — enough extra and your net tax owing drops under the line, and instalments stop applying entirely. The RRSP meltdown calculator shows the tax each year's withdrawals generate, which is exactly the number you're trying to cover.
The takeaway
Instalments aren't a penalty and the reminder isn't a bill. It's a two-part test: over $3,000 of net tax owing this year, and over it in one of the last two. Run the numbers before you either pay quarterly cash you don't owe — or skip payments the CRA is charging 7% on.