For the 2023 taxation year, Mr. Mason Boardman has combined federal and provincial/territorial income tax payable of $62,350. The employer withheld $61,600.

For 2024, his combined federal and

Question

For the 2023 ﻿taxation year, Mr. ﻿Mason Boardman has combined federal and provincial/territorial income tax payable  ﻿of $62,350. ﻿The employer withheld $61,600.

For 2024, ﻿his combined federal and provincial/territorial income tax payable is $29,760. ﻿The employer withheld $13,740.

In 2025, ﻿he anticipates having combined federal and provincial/territorial income tax payable of $52,370. ﻿Employer  ﻿withholdings are expected to be $47,390.

In January, 2025, ﻿you are asked to provide income tax advice to Mr. ﻿Boardman. He has asked you whether it will be  ﻿necessary for him to make instalments payments in 2025 ﻿and, if so, ﻿what the minimum amount should be and the dates  ﻿the amounts are due.

Required: Provide the information requested by Mr. ﻿Boardman. Show all your calculations.

i need step by step solution

VIPSolutions · Accepted Answer

# 2025 Income Tax Instalment Requirements for Mr. Boardman

## Step 1: Review of Past and Current Tax Payable and Withholdings

| Year | Tax Payable | Tax Withheld | Balance Owing |
|------|-------------|--------------|---------------|
| 2023 | $62,350     | $61,600      | $750          |
| 2024 | $29,760     | $13,740      | $16,020       |
| 2025 | $52,370*    | $47,390*     | $4,980*       |

_*2025 values are estimates_

## Step 2: Does Mr. Boardman Need to Make Instalments in 2025?

**Requirement Basis:**  
You must make instalments for 2025 if BOTH are true:
1. Your net tax owing is more than $3,000 in either of the two previous years (2023 or 2024).
2. Your net tax owing for the current year (2025) will also be more than $3,000.

**Net tax owing** = Tax payable minus tax withheld

### 2023
- Net tax owing: $62,350 − $61,600 = **$750**

### 2024
- Net tax owing: $29,760 − $13,740 = **$16,020**

### 2025 (Estimate)
- Net tax owing: $52,370 − $47,390 = **$4,980**

**Analysis:**
- In 2023, net tax owing was **$750** (less than $3,000).
- In 2024, net tax owing was **$16,020** (more than $3,000).
- In 2025 (expected), net tax owing will be **$4,980** (more than $3,000).

**Conclusion:**  
Since net tax owing is more than $3,000 in both 2024 and 2025, **Mr. Boardman must make instalment payments in 2025**.

---

## Step 3: Calculation of Minimum Instalment Amount

### CRA’s 3 Methods for Calculating Instalments

You can use the **lowest amount** calculated by any of these methods:

#### 1. **No-calculation option (Based on 2023 & 2024):**
- 1st two instalments (March 15 & June 15): 1/4 of 2023 net owing per payment
- Last two instalments (Sept 15 & Dec 15): 1/2 of [2024 net owing minus sum of first two instalments] per payment

#### 2. **Prior-year option (Based on 2024 only):**
- Each payment: 1/4 of 2024 net tax owing

#### 3. **Current-year option (Based on 2025 estimate):**
- Each payment: 1/4 of 2025 estimated net tax owing

Let's calculate each:

---

### Method 1: No-calculation Option

#### 2023 Net Tax Owing: **$750**

- March 15: $750 / 4 = **$187.50**
- June 15: $187.50

#### 2024 Net Tax Owing: **$16,020**

- Total of first two instalments: $187.50 × 2 = $375.00
- Remainder to be paid: $16,020 − $375.00 = $15,645.00
- Sept 15: $15,645.00 / 2 = **$7,822.50**
- Dec 15: $7,822.50

**Summary:**

| Date        | Amount      |
|-------------|------------|
| March 15    | $187.50    |
| June 15     | $187.50    |
| Sept 15     | $7,822.50  |
| Dec 15      | $7,822.50  |
| **Total**   | **$16,020**|

---

### Method 2: Prior-Year Option

- 2024 net tax owing: $16,020
- Each payment: $16,020 / 4 = **$4,005.00**

| Date        | Amount      |
|-------------|------------|
| March 15    | $4,005.00  |
| June 15     | $4,005.00  |
| Sept 15     | $4,005.00  |
| Dec 15      | $4,005.00  |
| **Total**   | **$16,020**|

---

### Method 3: Current-Year Option

- Expected 2025 net tax owing: $4,980
- Each payment: $4,980 / 4 = **$1,245.00**

| Date        | Amount      |
|-------------|------------|
| March 15    | $1,245.00  |
| June 15     | $1,245.00  |
| Sept 15     | $1,245.00  |
| Dec 15      | $1,245.00  |
| **Total**   | **$4,980** |

---

## Step 4: Recommendation

- **Minimum required payments:** $1,245.00 on each instalment date using the current-year option.
- If you pay at least this amount and your 2025 estimate is reasonable, you will not be charged interest or penalties.
- If your income increases, consider paying more to avoid underpayment.

---

## Step 5: Instalment Due Dates

- **1st instalment:** March 15, 2025
- **2nd instalment:** June 15, 2025
- **3rd instalment:** September 15, 2025
- **4th instalment:** December 15, 2025

---

## Summary Table

| Instalment Date | Minimum Amount (Current-Year) |
|-----------------|------------------------------|
| March 15, 2025  | $1,245.00                    |
| June 15, 2025   | $1,245.00                    |
| Sept 15, 2025   | $1,245.00                    |
| Dec 15, 2025    | $1,245.00                    |
| **Total**       | **$4,980.00**                |

---

## Notes

- **If your actual 2025 tax owing turns out to be higher than estimated, you may owe more at tax filing time and could be subject to instalment interest.**
- **If you expect your 2025 income to change significantly, recalculate your estimated tax and adjust your instalments accordingly.**

✨ VIPSolutions

Question:

Final Answer:

📢 Instructions:

Study Help, Fast Answers

✨ VIPSolutions

Question:

Final Answer:

📢 Instructions:

Related Answers

Study Help, Fast Answers