3 minutes reading time (533 words)

Little known secret about filing your HST – Quick Vs Regular

 

When start-ups or corporations register their business with CRA on default they are put on filing their HST based on regular method filing. Which is very straightforward. They can claim their Input Tax Credits (ITC) against HST collected.  There is another method which is the Quick Method of Accounting or Quick Method. This method requires certain conditions, for example accountants can not use this method, also if your sales are over $400K you can not choose this.

Most of independent contractors are eligible to file under method and this will add more income to their business. The reason is, they will remit 88% of what the HST they have collected and are not allowed to claim any HST that they have paid on purchases, except HST on capital assets, the 12% will be a “Sundry Income”.  Tis is win win since most independent consultant do not incur much HST paid.

Consequently, the Quick method can be a source of income for businesses that incur a small amount of taxable expenses since there would be very few ITCs

To demonstrate, we can use the example of an independent consultant in Ottawa, Peter, who has elected to use the Quick Method of accounting with respect to the 2018 calendar year. We will assume the following facts;

  Regular Method Quick Method Difference
Consulting fees  $        200,000.00  $       200,000.00  
HST Collected/Calculated  $          26,000.00  $         19,888.00  
ITC  $             1,250.00  $               300.00  
HST Owing  $          24,750.00  $         19,588.00  $      5,162.00

Furthermore, each year, GST/HST registrants who are on the Quick Method are entitled to a bonus 1% reduction in the remittance rate which is applicable to the first $30,000 of tax-included GST/HST collected minus GST/HST paid.

We were able to save 5,162 in HST and this became a Sundry Income.

It is never too late to change your HST filing method however, this change can be done at the end of filing period. For example, if your filing date is Dec 31. You are not allowed to change the period for the year that went by. What you need can make this change from Jan 1 to end of Feb.

This is fair since CRA doesn’t want businesses wait and see how much HST they have collected and paid and choose the best method. So basically, businesses need to make the choice and stick with it for the year. As soon as I realized that you are paying more in HST you can make the change for the year after.

Just like our example, if Peter starts to see his HST on purchase are exceeding 5,162 per year, he can opt and chose regular method accounting.

This is one of the 1st tasks that we perform for our clients, we assess their HST and show them how much they were overpaying each year. This puts a smile on our clients and they get so excited. Shortly after the smile is wiped out and the client is shocked why his previous advisor did not know this little secret. We respond that he is not alone and a lot of independent consultants are missing this secret. Hence we have dedicated this blog to this cause.

×
Stay Informed

When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.

Everything you need to know about corporate tax re...
Why You should Incorporate Your Real Estate Practi...
 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Guest
Tuesday, 04 October 2022

One-Stop Shop for Accounting
and Bookkeeping in Ottawa

Numetrica City Accounting

Awards / Featured On

Reviews

Check what some of our clients are saying about our services.
  • I highly recommend Moe Tabesh. His service is phenomenal, to say the least. His tax knowledge is extensive and he’s been able to save me a substantial amount of money by following his recommendations. In addition, he is warm, kind, understanding, positive, and flexible, which are qualities I find rare in most accountants I’ve worked with. You’re in good hands with Moe, I can’t recommend him enough.

    Samantha Biron

    President and Founder, Find Your Tribe
  • Moe and everyone at Numetrica have been incredible at helping with my new corporation and corporate and personal tax returns and my other small business. Their accounting skills are out of this world and the technology they use makes everything so simple and fast. The time you will save will be worth every penny. Thanks again Moe for all your help!

    Jeremy Prudhomme

    CEO, Jeeman TV
  • Mr Tabesh (Captain Number Cruncher) and his perfect team are not only professional in their fields, they are extremely passionate about their clients! Numetrica City continues to support us with corporate and personal tax returns, bookkeeping (thank you so much Sherry ) and We are so happy and appreciative for you and your responsible team, Moe!!!
    I really recommend these guys to everybody.

    Farshid Dehnavi

    President and CEO, Ink Plus
  • I did my first Corporate tax return and cloud accounting with Numetrica City and I am very satisfied with the work they did. The team was very responsive and answered all my questions. I 1000% recommend their services.

    Keddy Declan

    CEO , IT Referrals
  • I would highly recommend Numetrica City-Accountants, Tax and Bookkeepers. Exceptional customer service. I am assured that all my company tax services and payroll are taken care of because of the great team that Moe has. I like the fact that I do not have to worry about driving to a physical location for my accounting services, my company's accounting tax preparations are done online due to the excellent cloud service Numetrica City has. Definitely score a10/10. Thank you for all the good work that you guys do. Greatly appreciated!

    Sibeso Kehinde

    OUR PROCESS

    Discovery

    We’d love to hear about your goals and aspirations. After understanding the big picture, we’ll dig into the details of your bookkeeping process so we can assess your needs.

    Proposal

    Once we understand your needs, we’ll send over a proposal that outlines our plan for tackling your challenges and a fixed monthly price for those bookkeeping services.

    Set-up

    Once you accept our proposal, we’ll get your bookkeeping tidied and up to date and begin implementing cloud accounting tools that will ensure proper bookkeeping going forward.

    Get Connected

    Once the set-up is done, the hard part is over. You’ll be connected to your CPA-level bookkeeper and they will become your main point of contact.

    Reviews

    Once the clean up is done, the hard part is over. You’ll get connected to your bookkeeper and he/she will become your main point of contact. Don’t worry, we only select the best CPA or CPA students.

    Join our family

    Clients

    Trust in the superhero accountants of Numetrica to keep your numbers in order and for expert advice on growing your business. Numetrica City specializes in providing clients with in-depth accounting and bookkeeping services in Canada and the United States as well as financial advice to assist you in making the right decisions for your business.