How to Read a CRA Instalment Reminder and Choose a Calculation Option

A CRA instalment reminder (INNS1) shows what you owe in quarterly tax prepayments and offers three calculation options.

By Promissory.ca Editorial Team Reviewed against official Canadian sources Last updated: 2026-09-16

An instalment reminder is a letter from the Canada Revenue Agency telling you that tax withheld at source will not cover what you owe, and that the agency expects you to prepay part of the bill in quarterly instalments. It is a forecast rather than a bill for a past balance, and its accuracy depends on the information the CRA already holds about you. That is why the reminder arrives with several calculation options: you are allowed to disagree with the estimate when you have better information.

What the CRA Instalment Reminder Is Really Telling You

Who tends to receive one

The CRA generally expects instalments when your net tax owing is large enough and has repeated itself. In published terms, that means net tax owing above $3,000 — $1,800 for residents of Quebec — for the current year and either of the two prior years. Cross the line once and fall back below it, and you will usually not be asked to pay. Cross it consistently and the reminder becomes a routine part of your tax calendar.

Self-employed people, independent contractors, landlords with positive net rental income, investors holding non-registered accounts, and employees whose withholding does not match their total income are the usual recipients. Retirees drawing from several sources can join the list too, particularly when withholding is calculated on only one of those sources.

When the money is due

For most individuals there are four instalment dates: 15 March, 15 June, 15 September and 15 December. Farmers and fishers are handled differently — they have one due date, 31 December. Each instalment is a payment on account of the tax you expect to owe for the year. Missing a date does not change the total owing; it changes the interest that may accumulate on the shortfall.

Reading the Instalment Reminder Line by Line

Work through the document in a fixed order: the amount, then the schedule, then the options. The amount is the CRA's own estimate of what you should pay now. The schedule tells you which of the four dates applies. The options tell you how that amount was produced and how you can produce a different one.

Two things are worth stating plainly. First, the reminder does not override your own knowledge of your finances — it is an estimate built from data, and data can be stale. Second, whatever option you select, the underlying obligation is the same: pay enough, on time, to avoid interest on the shortfall.

How to Choose Between the Calculation Options

Option 1: pay what the reminder says

This is the default route. You do nothing except pay the amounts on the dates shown. It suits you when your income has been broadly stable, your deductions have not changed, and you would rather not spend an evening with your records. The trade-off is that it can overshoot if your income is falling and undershoot if your income is rising.

Option 2: recalculate from the prior-year return

This option asks you to work from the figures on your most recently filed return and follow the CRA's method. It often produces a result close to Option 1, because both lean on prior-year data. It is useful when you spot an error in what the CRA used, or when a one-time item inflated the prior year and you want to strip that effect out.

Option 3: estimate from the current year

This is the most accurate option when your situation has genuinely changed. If you sold a property, wound down a contract, took a leave of absence or stopped receiving rental income, an estimate built on the current year will land far closer to reality than one built on history. You need a reasonable working estimate of your net tax owing and the number of payments still ahead of you.

As a rule of thumb:

• Stable income, no surprises: Option 1 keeps life simple.
• Prior year was unusual but the current year is normal: Option 2.
• Income has fallen sharply: Option 3 prevents you from lending the government money interest-free.
• Income has jumped: Option 3, so you do not face a large balance plus instalment interest later.
• Complex or irregular income: Option 3, revisited at each due date.

Accuracy, Overpayment and the Cost of Guessing

Paying too little

If you pay less than the required amount, instalment interest may be charged on the difference, and the CRA may reduce or hold back refunds and credits until the account is settled. The interest is calculated on the shortfall, so the size of the problem depends on how far short you fall and for how long.

Paying too much

Overpaying is not penalised. The excess sits on your account as a credit and is applied when you file, or refunded if the return shows a balance in your favour. The real cost of overpaying is opportunity cost: money that could be working elsewhere is parked with the CRA instead.

Choosing a number you can defend

Whichever option you use, keep the calculation. A short note showing how you arrived at your figure, plus the supporting documents, is the difference between a straightforward conversation and a difficult one if questions arise later. If your circumstances shift mid-year, you are allowed to move to a different option at the next due date — the calculation is not locked in at the first instalment.

A Practical Routine Before Each Due Date

1. Confirm the due date that applies to you, including the single date for farmers and fishers.
2. Compare your expected income for the year against the year the CRA appears to have used.
3. Decide which calculation option fits, and write the figure down with the date.
4. Schedule the payment several business days ahead so it lands before the deadline.
5. File the confirmation, the calculation and any vouchers together in one folder.
6. Review again before the next due date rather than waiting until filing season.

If the Instalment Is More Than Your Cash Flow Allows

Instalment dates do not bend around a slow month, and the gap between what is owed and what is available can be uncomfortable. Start with the options above: if your income has genuinely fallen, an accurate current-year estimate is the legitimate way to lower the instalment. From there, build the payment into your monthly plan rather than treating it as a surprise, and look at whether other short-term obligations can be restructured or delayed.

Some people bridge the gap with short-term credit rather than fall behind on tax. If you explore that route, compare the total cost of borrowing rather than the headline payment alone, and recognise that revolving credit and payday-style products are very different tools with very different price tags. Promissory.ca is a loan comparison and information site: it connects visitors with licensed lending partners and is not a lender itself. Nothing here is tax, legal or financial advice, and your own circumstances should guide the decision.