Reduce your instalments

You can reduce the amount of your instalment payments, or you may not have to make instalment payments at all, if you reduce your net tax owing. You can do this by having tax withheld or by increasing the amount of tax withheld from certain types of income.

To have tax withheld from Old Age Security (OAS) or Canada Pension Plan (CPP) benefits, send a completed Form ISP3520, Request for Income Tax Deductions, to the Income Security Programs office of Human Resources and Social Development Canada. You can also make this request by calling 1-800-277-9914.

To do this for employment income or for pension benefits from an employer-sponsored pension plan, give a completed Form TD1, 2007 Personal Tax Credits Return, to your employer or pension plan administrator.

Income tax cannot be withheld from certain types of income, such as
self-employment, investment, rental income, and income from capital gains.

Example
Hugh, a resident of Alberta, pays his tax by instalments, but he decides to have more tax withheld from his income in 2007. His net tax owing has been $3,500 for several years, and he expects it will stay the same in 2007. Starting in January 2007, Hugh has an extra $250 withheld each month from his pension income.

Hugh now estimates his net tax owing will be $500 for 2007. Based on his estimate, he does not have to make instalment payments in 2007 because his net tax owing will not be over $2,000 for 2007. Hugh would disregard the instalment reminders he gets for 2007.

Forms and publications

• Paying Your Income Tax by Instalments pamphlet (P110)
• Form TD1, 2007 Personal Tax Credits Return
• Form ISP3520, Request for Income Tax Deductions