Xref: utzoo ont.general:1024 can.general:1711
Newsgroups: ont.general,can.general
Path: utzoo!lsuc!dave
From: dave@lsuc.on.ca (David Sherman)
Subject: Re: The Taxman Cometh for NSERC Award Recipients
Date: Fri, 8-Sep-89 08:26:10 EDT
Summary: you can combine prepayment and late payment of instalments
Message-ID: <1989Sep8.082611.10137@lsuc.on.ca>
Distribution: can
References: <6258@watdcsu.waterloo.edu>
Organization: Law Society of Upper Canada, Toronto

I'm back from vacation and find lots of interesting discussion
on tax.  I don't have much time right now, however, so I may not
post very much over the foreseeable future.

djohnson@watdcsu.waterloo.edu ( DOUG JOHNSON - GEOGRAPHY ) writes:
>Talk about a far-sighted policy (sarcasm). Students who receive an OGS
>(Ontario Graduate Scholarship) receive notice of such in late spring.
>They can start their award in May or September. Say they start in May and
>fall in the situation I've listed above re installment requirements.
>The first installment is due on the last day of March. Never mind that you
>don't have the scholarship yet, but you are required to pay a
>a tax installment BEFORE (this is not a typo) you receive any income!!!!!

A useful fact to know is that you can combine prepayment and
late payment of instalments, and have the prepayments generate
what's known as "contra-interest" to offset the late payments
of the same taxation year.  (Prepayments can't generate interest
that's actually paid to you.)

This feature was available before 1986 as an administrative concession,
but after Revenue Canada changed its mind, Parliament put it in the
Income Tax Act in subsection 161(2.2), effective 1987.  So you're
guaranteed the contra interest.

You instalments for 1989 are due March 31, June 30, Sept 30
and December 31.  (Effective 1990 they'll be due on the 15th.)
So if you didn't make your March payment, but on June 30 you
paid 3/4 of your instalment requirement, the "contra-interest"
you generate by having paid your Sept payment 3 months early
will offset the interest owing due to your March payment being
3 months late.  (That is, subject to fluctuations in the interest
rate, which has been going up as late.)  You can figure out for
yourself how much of your instalments you should pay at any
given time to allow the contra interest to offset any late payments.

Also, when figuring out the cost of interest as opposed to what
you can earn by leaving money in the bank, remember that interest
you pay on late taxes or late instalments is non-deductible, while
interest you earn is fully taxed.  Also, the interest you pay is
compounded daily.  The interest rate is 13% at the moment, but it
will be going up by 2 percentage points (leaving aside interest
fluctuations) on October 1.

David Sherman
Tax Lawyer
-- 
Moderator, mail.yiddish
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