Avoid HST Filing Errors

Small businesses that choose to file taxes on their own are prone to make errors. These bookkeeping errors may cause the business a lot of money in the long run. For instance, if the HST paid on expenses are not claimed, you risk losing the money when the period of claiming taxes elapses. Here are some of the common HST filing errors to watch out for.

Incorrect Reporting Of Bad Debts

Most inexperienced bookkeepers make two common mistakes when reporting bad debts. The first is writing off the entire amount in the invoice. What you need to do is to write off the amount excluding HST and then claim the rest as an ITC. If you have bad debts that are as a result of short-paid invoices, don’t write off the entire balance. You need to prorate the HST component.

Not Providing Adequate Documentation

Failing To Understand Restricted ICTs

There are certain expenses where ICTs are restricted. For instance, for meals and entertainment costs incurred by the business, the allowable deduction is restricted to 50%. Similarly, the HST that can be claimed as an ICT is also restricted. There are also certain expenses where no ICTs can be claimed. If part of the expense was used for personal reasons, this will also be restricted. Make sure you always double check the sale tax amounts when filing to avoid making these mistakes.

Transferring Money To A Different Company

When doing business with another company, you may transfer funds without issuing an invoice which means you’ll probably not account for the HST. You need to ensure that all the records are available in order to account for any unpaid HST.

Failing To Understand Expenses That Are Not Subject To HST

There are certain business expenses such as insurance and bank charges that are not subject to HST. Therefore, do not make any ITC claims on any of these expenses or any costs that are associated with them. In fact, using a professional bookkeeper with skill and experience helps to avoid such errors. Keep up to date with the accounting guidelines and any changes made by the tax department regarding non-taxable supplies.

Dealing With Unclaimed ITCs

Most importantly, work with an accounting professional to handle your bookkeeping and avoid the errors mentioned above.