If you’re self-employed, run a small business, or earn rental or investment income outside of regular employment, you’ve likely heard about quarterly tax installments. Unlike salaried workers, who have taxes deducted automatically from their paycheques, small business owners must proactively remit income tax in installments throughout the year.

Failing to understand or pay quarterly taxes can lead to costly penalties and interest, even if you file on time. This guide explains how quarterly taxes work in Canada and Québec, who needs to pay, how to calculate your installments, and what to do to stay compliant without letting tax season sneak up on you.

 

What are quarterly tax installments?

Overview for sole proprietors, partnerships, and corporations

Quarterly installments are advance payments you make toward your income tax bill for the year. Rather than paying everything at once at tax time, the government expects certain taxpayers to break up their payments over four scheduled deadlines.

Installments apply to:

• Sole proprietors and freelancers who don’t have tax withheld from income

• Partners in a business who share profits and pay tax personally

• Corporations with taxable income over a certain threshold

These payments go toward both federal taxes (CRA) and provincial taxes (Revenu Québec) if you’re based in Québec.

CRA and Revenu Québec rules on required payments

Both agencies operate under similar installment rules, but you typically need to submit payments separately:

• Canada Revenue Agency (CRA): Handles federal income tax, including the Canada Pension Plan (CPP) for self-employed individuals.

• Revenu Québec: Collects provincial income tax in Québec.

Each has its own portal, deadlines, and account numbers: managing both accurately is key to avoiding confusion or late fees.

 

Who needs to pay quarterly taxes?

Thresholds: $3,000 rule for federal and Québec taxes

You’re generally required to pay quarterly installments if:

• Your net tax owing was $3,000 or more in either the current or previous two years (federal and Québec apply this threshold independently).

• You expect to owe more than $3,000 in the current year after tax deductions at source.

For residents of Québec, you must monitor both CRA and Revenu Québec obligations, a common oversight that leads to dual penalties.

Business owners, freelancers, and landlords: are you included?

If you receive any of the following types of income without tax automatically deducted, you’re likely required to pay installments:

• Self-employment or business income

• Freelance/consulting income

• Rental income

• Investment or capital gains

• Dividend income

Even part-time businesses (like Etsy sellers, tutors, or Airbnb hosts) may cross the threshold without realizing it.

 

How to calculate installment payments

Option 1: No-calculation method (based on prior year taxes)

This is the safest and most common method, especially if your income is consistent:

• CRA and Revenu Québec will send you a suggested payment schedule based on your last return.

• You simply divide last year’s tax owing into four payments: no estimation required.

• Ideal if your income won’t change significantly from the previous year.

It minimizes risk, even if you end up owing less at year-end.

Option 2: Current-year estimate method (for new or changing income)

This method allows for more accuracy if:

• You’re newly self-employed or your income fluctuates year to year

• Your income will be significantly lower this year

You’ll need to:

• Estimate your current-year net income

• Calculate expected taxes owing (use online calculators or speak with a tax professional)

• Divide that amount into four equal payments

Important: If you underestimate and underpay, you may still face interest charges, even if the intention was honest.

 

Payment deadlines and methods

Due dates: March 15, June 15, September 15, December 15

These dates are consistent every year. Each payment covers tax for the upcoming portion of the year:

• March 15 – Q1

• June 15 – Q2

• September 15 – Q3

• December 15 – Q4

Mark these dates in your calendar or accounting software. Late payments accrue interest from the missed due date.

Payment methods: CRA My Payment, Revenu Québec, financial institutions

You can make installment payments:

• Online via CRA My Payment

• Through your bank’s online bill payment system

• Via pre-authorized debit or credit card

• At a financial institution with a remittance voucher

Revenu Québec offers similar online tools via the ClicSÉQUR portal. Ensure you pay the correct amount to each agency using the right reference numbers.

 

What happens if you don’t pay?

Interest and penalties for underpayments or missed deadlines

Missing an installment or paying less than required results in:

• Daily compound interest on the underpaid amount

• Possible installment penalties if the total interest exceeds $1,000

These costs accumulate quickly and are not tax-deductible. Unlike income tax balances, installment payments are expected in real-time, and there’s no grace period.

CRA and Revenu Québec enforcement measures

Beyond penalties, repeated non-compliance can trigger:

• Flags on your account that increase audit likelihood

• Loss of interest relief options

• Complications in securing financing or business grants

Paying installments is part of running a financially responsible and reputable business.

 

Tips for staying on track

Set up a tax savings account

To avoid scrambling for cash:

• Open a separate savings account for tax obligations

• Set aside 25–30% of your revenue (adjust based on income level and province)

• Automate transfers after each payment from clients

This approach builds financial discipline and protects cash flow when tax deadlines arrive.

Use software or a bookkeeper to track obligations

Modern accounting tools (like QuickBooks, Wave, or Xero) can:

• Estimate your quarterly payments

• Track CRA and QST balances

• Remind you of due dates

• Help generate year-end reports quickly

Alternatively, working with a bookkeeper or accountant ensures your installment payments align with business performance and current tax rules.

Why small businesses should pay estimated quarterly taxes proactively

Many small business owners mistakenly assume they can delay income tax payments until year-end. However, paying estimated taxes quarterly ensures smoother cash flow management, avoids last-minute financial strain, and minimizes the risk of penalties. More importantly, proactive quarterly payments signal financial responsibility, which can bolster credibility when applying for loans, grants, or vendor credit. These installments also help you distribute your tax obligations evenly over the year: essential when operating on lean or fluctuating revenue cycles.

 

How to estimate quarterly tax payments with seasonal or fluctuating income

If your business experiences seasonal highs and lows (common in industries like tourism, construction, or retail) estimating quarterly taxes can feel overwhelming. Instead of using flat rates, consider adjusting your calculations based on income trends from past years or current contracts. Accounting software can project taxable revenues and net income dynamically, allowing you to adjust installment payments accordingly. This approach helps prevent overpayments during slow periods and protects your cash reserves for when they’re most needed.

 

Self-employment tax responsibilities: what business owners often overlook

For self-employed individuals, quarterly taxes don’t just cover income: they also include your full Canada Pension Plan (CPP) contributions. Unlike salaried workers whose employers share the CPP burden, sole proprietors and freelancers must pay both the employer and employee portions. This can significantly increase your tax bill if not anticipated correctly. Planning for this self-employment tax is essential, and the estimated tax payment schedule helps mitigate surprise obligations at year-end.

 

Bookkeeping best practices for managing quarterly tax payments

To manage estimated taxes effectively, accurate and real-time bookkeeping is critical. Small business owners should record income and expenses promptly and categorize them properly to ensure reliable profit calculations. Using tools like Wave or QuickBooks, you can set up tags or categories for “tax reserved” amounts and view projected installment payments at a glance. If you’re unsure about classifications or deductions, working with a bookkeeper can prevent costly miscalculations or missed filing deadlines.

 

The role of quarterly tax payments in structuring a sustainable tax year

Quarterly tax installments aren’t just a legal requirement: they help structure your tax year into manageable segments. Instead of dreading one massive payment every April, business owners can use the installment schedule to assess profitability and adjust operations quarterly. It’s an opportunity to recalibrate budgets, fine-tune marketing efforts, or renegotiate supplier contracts based on how much you owe or can save each quarter. This rhythm creates more predictability in an otherwise uncertain small business environment.

 

Avoiding penalties by knowing when you have to pay installments

Some entrepreneurs only realize too late that they should have been making installment payments. If you owe more than $3,000 in federal or Québec taxes in two of the last three years, you’re legally required to make quarterly payments in the current year even if your income dips. Ignorance of this rule isn’t a valid excuse, and penalties apply regardless of intent. Checking past notices from the CRA or Revenu Québec or consulting with a tax advisor can ensure you don’t unknowingly fall into non-compliance.

International tax structuring for sustainable competitiveness

Séguin advises corporations on international tax strategies that balance compliance with optimization across jurisdictions. With a deep understanding of global tax regimes, transfer pricing principles, and regulatory developments, their specialists collaborate with legal and financial leaders to design frameworks that minimize risk and enhance after-tax profitability. From entity structuring in emerging markets to cross-border M&A tax planning, Séguin’s global perspective ensures long-term fiscal efficiency.