Should You Make Tax Installment Payments to Avoid Penalties?

If you normally owe tax when you file your return, you’re likely familiar with quarterly income tax instalments. These payments let you prepay part of your estimated tax for the current year before the balance is due the following April, helping you avoid a larger lump-sum bill and potential interest charges when you file.

Across Canada (except Québec), the Canada Revenue Agency (CRA) generally requires instalments when you owe $3,000 or more in tax for two consecutive years. Québec uses a lower threshold of $1,800 because residents file separately with Revenu Québec in addition to the federal return; instalment requirements in that province are based on net income tax payable for either of the two prior years.

Instalments are suggested payments rather than fixed balances, and if your income changes during the year you have options: pay the amounts requested, make smaller payments based on current-year income, catch up later, or skip a payment. Keep in mind that underpaying or paying late can trigger interest and, in some cases, penalties. The CRA does allow some flexibility if your total instalments for the year approximate your actual tax owing.

March 15 instalment

When you receive a March 15 instalment reminder, the CRA bases the March and June instalment amounts on the tax owing from two years earlier, because the most recent tax return may not yet have been filed or assessed. For example, a March 15, 2026 reminder will typically use your 2024 tax return as the reference year.

If your tax situation changed and you expect to owe substantially less in the previous or current year, you can often reduce or skip that instalment. Once your latest tax return is filed and assessed, you’ll know your updated tax position and can plan catch-up payments if necessary.

June 15 instalment

The CRA permits taxpayers to balance instalment payments across due dates so long as total instalments for the year are roughly in line with the eventual tax liability. For example, if the CRA requested $4,000 for both March and June and you had paid nothing to date, but your correct annual tax owing is $10,000, you could make a single $7,500 payment on June 15. That would effectively average your instalments: one payment late, one early and one on time. A final payment later in the year—for instance on December 15—would then complete the total instalment requirement.

Your March and June reminders typically arrive in February. If you’re unsure whether instalments were required for the current year or whether you already made payments, check your CRA My Account. Otherwise you might not notice missed instalments until you receive the August communication that covers the September and December amounts.

September 15 instalment

September and December instalment notices are recalculated using your most recently filed tax return. That means while March and June instalments in a given year may be based on your return from two years prior, the September and December instalments will generally reflect your most recent filed return.

Even if the CRA does not request instalments for September and December, you may still need to catch up on earlier missed payments to avoid accruing interest. Use these mid- and late-year reminders as checkpoints: compare what the CRA requested with what you actually paid and adjust payments if necessary.

December 15 instalments

The December 15 instalment is the final scheduled payment of the calendar year and a good moment to reassess your tax position. By December you should have a clear picture of most of your income for the year, which helps taxpayers with variable earnings—such as self-employed individuals or those with irregular capital gains—estimate their final liability more accurately.

Investors should note that pooled investments, like mutual funds, may distribute taxable capital gains even when an investor did not sell any units personally. Those distributions can increase your tax owing for the year, so factor them into your final instalment calculations.

Final note

You can make instalment payments at any time; the scheduled dates are simply deadlines for suggested amounts. If you fall behind or underpay, interest and possible penalties can apply, but making a payment—even after a deadline—can help stop further interest from accumulating. When making late payments early in a new year, be careful to apply the payment to the correct tax year account to ensure it reduces the intended instalment balance.

The most reliable way to avoid interest is to pay the instalments the CRA and, where applicable, Revenu Québec request. If you prefer to base instalments on your current-year income because your earnings fluctuate, that approach can reduce overpayments but carries the risk of underestimating tax and incurring interest charges if your income ends up higher than expected.

Income Tax Guide for Canadians

Deadlines, tax tips and more