Samuel Tamm is the sole shareholder of MET, a Canadian-controlled private corporation carrying on an active business, with a December 31 fiscal year-end. Samuel met with you on January 6, 2023, about a number of issues. 

On August 1, 2022, Samuel received a demand to file a tax return for the 2020 taxation year. Samuel did not file a tax return for 2020 because salary from MET was his only income for the year. The payroll clerk at MET was careful to ensure that the correct amount of tax was withheld from Samuel’s pay and remitted to the CRA monthly. Thus, Samuel is looking for confirmation that he is not required to file a tax return for 2020.

In 2021, Samuel won $500,000 in a lottery, which he invested wisely. Because of the investment income, he prepared a tax return for 2021. He personally delivered the tax return, together with a cheque for $9,200, the balance of tax owing, to the CRA on September 30, 2022. According to Samuel’s calculations, he will owe $12,000 in tax on his investment income earned in 2022, so he plans to file his 2022 tax return on time. He did not make any tax instalments in 2022 as he did not receive an instalment notice from the CRA. Samuel wonders whether he should make instalments for 2023. He estimates that the tax on his 2023 investment income will be $16,000. 

Required: 

Prepare a memo to Samuel providing advice on the issues. Assume the prescribed rates of interest under Reg. 4301 for computing taxable benefits are 3% for the first, third, and fourth quarters, and 2% for the second quarter of 2022.