Many Ontario business owners and freelancers are surprised to receive a CRA installment reminder—often after filing a strong year. CRA installment payments are one of the most common areas of confusion and penalties for taxpayers in Ontario, Canada.

This guide explains what CRA installments are, who must pay them, how they’re calculated, and how to manage them properly in 2025 to avoid interest and penalties.

What Are CRA Installment Payments?

CRA installment payments are prepayments of income tax required when a taxpayer is expected to owe a significant balance at year-end. Instead of paying one large amount in April, CRA requires taxes to be paid throughout the year.

Installments apply to:

• Sole proprietors
• Freelancers and independent contractors
• Corporations
• Some individuals with investment or rental income

Who Must Pay CRA Installments in Ontario?

You are generally required to pay installments if:

Individuals & Freelancers

• You owed more than $3,000 in tax in the current year and
• You owed more than $3,000 in either of the two previous years

Corporations

• You owe more than $3,000 in corporate income tax
• Installments apply regardless of province, including Ontario

CRA Installment Due Dates (Ontario – 2025)

Individuals & Freelancers

Installments are due quarterly:

• March 15
• June 15
• September 15
• December 15

Corporations

Installments are due monthly, usually starting one month after year-end.

⚠️ Missing installment deadlines results in interest and possible penalties, even if you file your return on time.

How CRA Calculates Installments

CRA offers three installment methods:

1. No-Calculation Option (CRA’s Method)

• Based on prior-year taxes
• Lowest risk of penalties
• Often results in overpayment

2. Prior-Year Option

• Based on last year’s tax liability
• Useful if income is stable

3. Current-Year Option

• Based on expected income for the current year
• Best cash-flow option but highest risk if underpaid

📌 CPA Tip:

Most Ontario freelancers and businesses benefit from custom installment planning, rather than blindly following CRA reminders.

Common CRA Installment Mistakes in Ontario

• Ignoring CRA installment notices
• Underestimating current-year income
• Not adjusting installments after business growth
• Confusing installments with tax filing deadlines
• Paying late or inconsistently

These mistakes frequently lead to CRA interest assessments.

How to Reduce or Manage CRA Installments

1. Adjust Installments Based on Income Changes

If your income has dropped, you may legally reduce installment payments—with proper calculation.

2. Use Bookkeeping Software (QuickBooks Online)

Accurate, up-to-date bookkeeping allows:

• Better income forecasting
• Correct installment planning
• Reduced CRA audit risk

3. Work With a CPA

A CPA can:

• Calculate optimal installment amounts
• Prevent interest and penalties
• Align installments with tax planning strategies

Professional guidance often saves more than it costs.

CRA Installments and Audits: The Hidden Risk

Incorrect or inconsistent installment payments can:

• Trigger CRA reviews
• Lead to reassessments
• Increase audit risk for Ontario businesses

CRA often compares installment payments to reported income patterns.

Frequently Asked Questions (FAQs)

What happens if I don’t pay CRA installments?

CRA will charge non-deductible interest and may apply penalties if installments are significantly underpaid.

Can I reduce my CRA installment payments?

Yes, if your income is lower—but calculations must be accurate to avoid penalties.

Are CRA installments mandatory?

Yes, if you meet the thresholds. Ignoring them does not remove the obligation.

Do Ontario freelancers have to pay installments?

Yes, if they owe more than $3,000 in tax for the year.

Can a CPA deal with CRA installment issues?

Yes. A CPA can recalculate, negotiate, and manage installment compliance.