Newsgroups: can.general
Path: utzoo!lsuc!dave
From: dave@lsuc.uucp (David Sherman)
Subject: Re: income tax: what's this nonsense?
Date: Thu, 30-Mar-89 22:49:01 EST
Summary: comments on instalment requirement
Message-ID: <1989Mar30.224905.3741@lsuc.uucp>
Distribution: can
References: <144@mindlink.UUCP> <1989Mar29.002321.5939@gpu.utcs.toronto.edu> <1107@apss.apss.ab.ca> <1989Mar29.212532.22054@gpu.utcs.toronto.edu> <12872@watdragon.waterloo.edu>
Organization: Law Society of Upper Canada, Toronto

In article <12872@watdragon.waterloo.edu> ebspencer@watdragon.waterloo.edu (Bruce Spencer) writes:
>I pay tax by quarterly installments because I don't get enough deducted from
>source. There are two ways to calculate the installment - go by last
>year's earnings, or guess what you will be making. I'm a PhD student
>whose funds are dwindling so that this year I expect to make less than last. 
>So I want to pay by my expected earnings for 1989. Ok so far.
>
>Here's the twist. If I get really industrious, finish up, and start
>earning real money, say, in September, I will end up not giving enough 
>for my first three installment. RevCan wants the installments to be
>equal so I will owe interest, calculated at usurious rates, for the first 
>installments. 
>
>Or, in a few words, I'll owe income tax on income I hadn't earned yet!

Offsetting interest within the year is allowed.  So if you find
in September that you haven't been paying enough, you can make up
for it by paying your December instalment early.  To take a simple
example, if you pay 1/4 on March 31, skip June 30 entirely and
pay the remaining 3/4 on September 30 you'll have no interest owing --
the prepayment of the last quarter offsets the interest which
would apply on the late payment from the second quarter.

Whether the system you describe is unfair is hard to say.
Specifically, designing a system which doesn't penalize you
in the example you give would be difficult, without opening
up all sorts of tax avoidance possibilities.  The problem is
that income is fundamentally calculated on the year as a whole,
so the concept of "hadn't earned yet" which you raise is
nonexistent.  There's no distinction between a dollar earned
in January and a dollar earned in December.

Then again, if the reason you have to pay instalments is that
some or all of your income comes from self-employment, there
are all kinds of other possibilities open to you.  Consult a
tax professional.

David Sherman
-- 
Moderator, mail.yiddish
{ uunet!attcan  att  utzoo }!lsuc!dave          dave%lsuc@ai.toronto.edu