You’ve decided to take your business seriously and have just registered for the GST/HST. You’re now wondering what’s next? Let’s go over what you need to do now that you’re registered for GST/HST.
You have two sides of the GST/HST of which you have to keep track. The first is what you are charging to your customers called GST/HST Collected. The second is your Input Tax Credits (ITCs), which is the GST/HST you paid on purchases and other business expenses. Note that GST/HST becomes due once it’s invoiced, whether or not you’ve been paid by your customer is irrelevant. The same goes for the ITC side; it’s when you were invoiced, not when you paid the bill.
Your 15 digit GST/HST number (123456789RT0001) must be shown on all invoices, receipts, or other documents you use to invoice customers. If you’re using accounting software, such as Sage 50, the first thing you must do is put that into your accounting software. It will now show up on all your invoices. This is important, as CRA will not honour your client’s Input Tax Credit without your business number on the invoice.
You must indicate whether or not an item is taxable, the GST/HST amount must also be shown separately on your invoices or receipts, and the rate of GST/HST applied. If you are charging HST, show the total HST as well as the rate; do not show the federal and provincial amounts separately.
Other items you must include on your invoice are the business/operating name, invoice date, buyers name/operating name, brief description of the goods, and terms of payment.
If you are finding that people are always trying to get you to just take ‘cash’, don’t. This can come back to bite you in the butt. If you are finding the ‘cash’ conversation coming up a lot, then just include the GST/HST in the price when you quote it. If they ask about the GST/HST, just say ‘Don’t worry about it, it’s all included’. That, in most situations, seems to alleviate this problem. On the invoice, you’d just separate it.
Filing Your GST/HST Return
You must file your GST/HST return based on the period you were given upon registration. Most businesses are set-up as annual filers with installments payments 4 times per year. You can change this to monthly or quarterly if you find it hard to make installments. Installments are generally due April, July, October and January, which is the same timeframe for filing your quarterly returns. I have had clients go monthly, as this alleviates that big bill every quarter, and allows them to get a better handle on their GST/HST.
CRA will send you a return (GST34) prior to your filing period. Generally, CRA prefers people to electronically file their returns, and CRA has ensured this by not having the line numbers or boxes on the return. You can do electronically file via CRA’s website using GST/HST Netfile® or via your online banking. I generally file the return electronically for the client, and then they just pay it through online banking.
Your GST34 return comes with an access code, which is used to confirm your identity when using GST/HST Netfile®. If you happen to lose this code, you can retrieve it using CRA’s GST/HST Access Code Online service. You will need your prior return’s information or access code to make this work.
The line numbers you will have to worry about most are: 101 – Sales, 105 – GST/HST collected, 108 – Input Tax Credits, and Line 109 – GST/HST Owing (Refund).
You have to keep all records that support your filing of your GST/HST return. This means your invoices, supplier bills/receipts, cash register tapes, POS reports, etc. If you don’t keep these then your claim for ITCs will be denied; however, CRA will be happy to take the GST/HST collected as they can go by your deposits for that amount. I have seen CRA completely deny the expense side and keep the revenue side; even going into the persons personal account and including any deposits in there as income. Needless to say this person should have kept all his receipts and been organized. A bookkeeper, like us, will help you do that. Remember you have to keep records for six (6) years after the end of the tax year. For 2013, you’d have to keep the records until the end of 2019.
So, the GST/HST does become a big pain in the butt to keep track and remit; however, in the end, it will make you much more careful about keeping your records. And, really, people will take your business more seriously if you’re charging GST/HST as you look like a legitimate business.