Revenue Canada Finally Caught Up To Me

It was bound to happen sooner or later, but the Canada Revenue Agency (formally known as Revenue Canada) finally caught up to me. I had a good run going but I guess my number came up. For as long as I’ve been in business for myself I have always been able to pay my income tax on the day I file my tax return. This is the ideal solution to be in because I get the use of the government’s money interest free for a full year. People who work at a job have their income tax withheld from their paycheck. Then they buy a RRSP at the end of the year to try to get a tax refund. If you have read my earlier post about getting a tax refund then you know I feel about that.

The ideal way to pay income tax is to pay it all on the day the income tax return is due and this was the situation I was in. I set aside a few thousand dollars each month and place it into an ING savings account. When tax time comes, I just write one big check from the account and keep the interest earned thought out the year. In other word, I have the use of the government’s money to make money. Better in my hand than theirs!

The Canada Revenue Agency has a rule that if you owe more than $2,000 in tax in a year then you have to make quarterly installment payments for next year’s taxes. However, this is not a hard and fast rule and the CRA doesn’t require anyone to make installment payments until they send them an installment notice. Well, after all these years, I finally got that notice. I thought I was free this year because it’s August already and I figure any installment notice would come earlier in the year. Normally, installments are made every 3 months. However, because we’re in August already the CRA wants me to make two big payments – one in September and another in December. These payments mean I will owe nothing when I file my 2006 tax return next April. That means I will lose four months of interest. On a positive note, the CRA based my installments on me maxing out my RRSP contribution limit, which was nice of them. If they based the installments on me not getting a RRSP, I would be getting one big refund!

7 thoughts on “Revenue Canada Finally Caught Up To Me”

  1. Marco says:

    Oh well… too bad. I guess you weren’t earning a hell of a lot of interest anyway. according to your link to your local ING bank your rates are at 3.35% – 3.50%. In Australia, savers are laughing (while people on mortgages crying as a result of rising interest rates – even finding themselves in negative equity>/a>, with an ING interest rate of 5.85% here.

  2. John Chow says:

    The ING account is a good place to park the money while I decide what investments to go into. Now that I have to make installments, it just mean less capital that I have access to. And that sucks.

  3. Bob says:

    I have a tax related question for you John…How come when you make such big money, you prefer to stay in Canada (probably the most taxed country in the world) and you do not choose to live in a caribbean tax haven and pay $0 taxes?…and I guess the question is valid for those canadian “google whores” also…. I mean wouldn’t make more sense to you?…or the rich people of canada and their government know a secret that nobody else knows?….I hope the question will not remain rethorical….

  4. John Chow says:

    That’s a good question Bob. There are many answers. If it was just purely money, then yes, I would be living in a lower tax place. But other factors beside just money enter the equation. My family lives in Canada, as do most of my friends. And the tax situation really isn’t that bad, if you have good tax advisors. There are tons of way for you to shelter income.

    The main reason for staying in Vancouver, other than family and friends, is this is the best city in the world to live! You come visit and you’ll understand.

  5. Bob says:

    It’s true that more than money enter the equation when you choose where to live. But in our case (domainers), there just arent’t too many ways to shelter income…I mean besides the domains renewal costs that you can claim, the rest is pure profit which is taxed at 44%…I would like to stay in Canada also, but in my case the taxes are just too high…I would love to have a good tax advisor….nobody seems to know or understand our business model…Could you recommend someone?…I would be very grateful if I could find a way to stay in Canada and not become a tax exiled….Thanks.

  6. Bob says:

    Thank you very much John. I appreciate it.

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