In that situation, you can end the year with a significant amount owing to the CRA. In that case, they will ask you to make installment payments. Yes this is right. My wife is self employed she has to make quarterly payments. I pay taxes in advance too. It is deducted from my pay cheque every 2 weeks. This is to make fair for all those who are not self employed.
Quarterly installments are normal. If you ignore, cra will levy interest and penalties on the arrears. CRA does not send out random letter. Yes it is correct. It is not pre-paying taxes.
Not in That is, they allow for one year being abnormal, but if there is a pattern emerging then you must pay by instalments or face interest charges eventually. It doesn't just relate to employment income, and applies to all sorts of tax payers, not just the self-employed. For example, if you just bought a house and don't have bank interest from that big chunk of money you had in previous years.
I just got the same letter. I stopped working a few years back and my income is based solely on investments. The problem is that I have no idea how much tax I will be owing in If I decide to sell stock in Dec of based on the market, this can drastically change what I will be taxed as whether I declare a capital gain or loss.
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