As a small business, managing your taxes is probably one of the most time-consuming affairs you have to deal with. Thankfully, there are ways that you can reduce the paperwork and make HST/GST filing simple and quick for your business. When GST was introduced back in 1991, the government made efforts to ensure it doesn’t place any unnecessary burden, especially on small business owners. This bore fruit to the simplified method of claiming Input Tax Credits and quick method of accounting. Both are used for GST and HST filings helping small businesses simplify the process to a great extent.
Why Use The Simplified Method For GST/HST Remittances?
Small businesses across the country can use the simplified method to ease the burden of operation of the GST. This method has really gone a long way to make the tax system substantially simple for small businesses. There’s no need to handle all the paperwork required when claiming ITCs if you choose to use the simplified method or quick method of accounting. Therefore making bookkeeping for small businesses simple and effective.
How The Simplified Method Of Claiming ITCs Works
One of the major challenges of claiming ITCs especially for small businesses is the cost of compliance. Businesses had to use so much time and effort in order to claim input tax credits. ITCs are simply the HST/GST that is paid for taxable goods and services that are required in order to run the business. These calculations were made by using the invoices where the GST had to be separated from provincial sales tax and other items like gratuities making the process even more complicated for bookkeepers. The simplified method has changed all these by introducing a single formula to calculate the ITCs.
Can You Use The Simplified Method?
Your business can use the simplified method to claim ITCs if you fulfill the conditions below:
- If the revenue obtained annually from taxable goods and services is $500,000 or less in your last fiscal year
- If your taxable supplies amount to a total of $500,000 or less (this includes supplies of your associates, goodwill, and sales of capital real property)
- During your last fiscal year, you made $2 million or less in taxable purchases
The Quick Method Of Accounting In HST/GST Filing
If you decide that the quick method is beneficial to your business, you will need to apply to the CRA or Revenue Quebec for approval by completing the required forms. You can then start using the method on the effective date that you indicated to the CRA when making your application.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.