It's important to note that if your income will drop in 2010, you should change your quarterly instalment remittance method. Many people miss this opportunity, submitting instead to the CRA billing method. But it really is a shame to pull money out of the marketplace, perhaps at just the wrong time, to make an over-inflated instalment payment at this time of the year.
Instead, you can switch your method of paying instalments, estimating your income for 2010 or basing your instalments on last year's income only; however, know that if you are wrong, and you end up owe money when you file your 2010 return next spring, you'll pay some interest on the differential.
Managing your cash flow to minimize tax overpayments, whether by instalment or through tax withholdings at work, is just plain smart. Remember you are only required to pay the correct amount of tax, not a dime more. The rest of the money you keep for yourself is "milk money", or certainly money that can be used to pay down bad debt, like credit card debt, or park in a tax-wise investment like an RRSP or TFSA.
So, check out the following principles for getting your tax prepayments right, all year long:
Remember, tax literacy is important, all year long, not just during tax season. When you manage your taxes, you manage your cash flow, and that provides you with lots of opportunity to manage your future wealth.
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