You have to pay installments if both these criteria are met:
- you ended up owing significant tax last year
- you're going to end up owing significant tax this year
The letter you received is called an installment reminder and CRA says it only means you may need to send installments.
An instalment reminder is sent to help you determine if you have to pay income tax by instalments. The reminder will suggest an amount to pay and list the calculation options.
You have three ways to calculate your installments:
- use the number from the letter
- use your 2014 actuals
- use your 2015 numbers
This last one will be best for you, because you will have source deductions. CRA describes it this way:
You determine the amount of your instalment payments based on your estimated current-year (2015) net tax owing, any CPP contributions payable and any voluntary EI premiums. Use the Calculation chart for instalment payments for 2015 (pdf) to help you calculate your total instalment amount due.
If you use the current-year option and make the payments in full by their 2015 due dates, we will not charge instalment interest or a penalty unless the amounts you estimated when calculating your total instalment amount due were too low.
So take 5 minutes to fill out the form showing you don't need to send installments after all, and this particular monkey will be off your back.