Quarterly taxes can be challenging to navigate for small business owners.
But while this means you have to calculate your tax payments four times a year, it also means that you don’t have one lump sum tax payment each year.
Instead, it spreads out your tax payments over the course of the year, as you earn income.
And don’t worry, a certified tax accountant can help you calculate exactly how much you owe each quarter.
But, if you’re looking for some strategies to stay financially organized or to learn more about tax write offs in Canada, our blog is full of helpful information for individuals and businesses.
Now, let’s find out more about quarterly taxes and what you need to know.
What Are Quarterly Taxes?
Quarterly taxes are exactly what they sound like.
They’re taxes you pay to the Canada Revenue Agency on a quarterly basis throughout the year.
The important deadlines for these taxes each year are March 15, June 15, September 15, and December 15.
Quarterly taxes can also be called estimated taxes.
They’re a way to pay as you earn revenue throughout the year instead of having one giant bill during tax season.
And remember, you have to ensure that you’re paying them if you’re earning income that doesn’t have taxes automatically deducted as it would be if you were earning a salary as an employee.
Instead, keeping your taxes paid up to date quarterly means that you will avoid potential penalties and interest for underpayments to the Canada Revenue Agency.
Do You Need To Pay Quarterly Taxes?
Like we mentioned before, if you’re a salaried employee in Canada then you don’t need to pay quarterly taxes.
That’s because not everyone has to.
But, if you’re self-employed as a freelancer or own a small business, then you probably need to pay quarterly taxes depending on the total income you make.
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The rule here is that if you expect to owe more than $3000 in taxes for the year, or if you’re in Quebec more than $1800, then you should be paying quarterly taxes.
Another general rule is that if your income isn’t taxed at the source, often called source deductions, then there’s a high chance you have to pay quarterly taxes.
You also have to pay quarterly taxes if you earn money through investments or rental properties.
You can see that a lot of people potentially fall into the category of having to pay quarterly taxes.
If this includes you, our tax planning services can help you stay on top of your taxes.
That way, you can avoid penalties and interest charges from the Canada Revenue Agency.
How To Know How Much You Owe In Quarterly Taxes
Hiring a professional accountant can simplify the process so that you know exactly how much you owe each quarter.
But here’s how it works generally.
First, calculate your total annual income.
This must include all sources of income, including investments, dividends, and any self-employment earnings.
Next, determine which deductions apply for your business.
This could include home office costs, equipment, or any travel for your business.
You’ll want to keep on top of eligible deductions because they can substantially lower the amount of tax you pay each quarter.
Next, after applying the deductions, the income that remains is called your taxable income.
At this point, check your appropriate federal and provincial tax rates to calculate how much you owe based on your taxable income.
Remember to add in what you owe for Canadian Pension Plan and Employment Insurance contributions if you’re self-employed.
Finally, the last step is to divide the amount you owe by four to get your quarterly number.
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How To Pay Quarterly Taxes
While it can be painful to pay your quarterly taxes, the good news is that the Canada Revenue Agency makes it easy to pay them by offering multiple payment options.
You can pay them online with either your online bank or credit card using the “My Payment” tool through the Canada Revenue Agency’s website.
This is a popular option as it is fast, secure, and convenient.
You can also pay by mail by mailing a cheque and Form RC160, which is a Remittance Voucher, to the Canada Revenue Agency.
Ensure the cheque is postmarked by the quarterly due date to avoid any possible penalties.
You can also pay by phone if your financial institution offers this option via telephone banking.
But you’ll have to check with them to see if you can use this option.
Finally, the last method offered by the Canada Revenue Agency is a pre-authorized debit payment, which you can set up through their website in your Canada Revenue Agency account.
These payments are automatic so that you never miss a deadline.
Remember to choose the one that is easiest for you and your business.
Important Steps For Filing Your Quarterly Taxes
Now, you know exactly how much you owe, but how do you file your quarterly taxes?
Let’s go through the process below.
1. File Them On Time
The first step is filing your quarterly taxes on time, by each quarterly date.
If you miss a date, late payments can quickly grow due to penalties and interest accruing on missing payments.
Use reminders, software, or the services of an account to stay on top of your deadlines.
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2. Make Sure They Include All Your Income
Remember to make sure that your filing includes all of your income, from every source.
Not reporting all of your income sources can lead to potential audits with the Canada Revenue Agency, along with penalties and fines for incorrect filings.
Keeping detailed records is a good strategy to avoid this.
3. Use Your Deductions
As we mentioned before, use all of the deductions you or your business qualifies for.
Some other examples tax deductions include vehicle mileage for work, or internet costs.
Deductions can reduce your quarterly tax bill.
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4. Work With A Professional Accountant
Finally, it’s always recommended to work with a professional accountant even if your business is not complex.
They’ll make sure you are aware of all possible deductions that your business qualifies for.
They can also help you stay up to date with all required tax payments.
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Book Your Consultation With Our Accounting Firm Today
Paying quarterly taxes doesn’t have to be stressful or confusing when you understand the process and plan ahead.
Staying on top of deadlines, reporting all income accurately, and using every eligible deduction can help you avoid penalties and keep your cash flow predictable throughout the year.
While the calculations and filings can feel overwhelming, you don’t have to manage them alone.
Working with a professional accountant ensures your quarterly payments are accurate, compliant, and optimized for your situation.
At Business Minding Services, our team of accountants helps small business owners and self-employed Canadians stay organized and confident with their tax obligations.
Book your consultation with Business Minding Services today and take the guesswork out of quarterly taxes.
