Tax Tip Thursday

Common Issue

This is a common topic to have issues with when it comes to HST taxes. Sometimes people misunderstand how it works, and other times they understand but just don’t have the expertise to do it properly. This can have very expensive consequences!

Should I Do It Myself?

I have found that many people who file their own HST do NOT do it correctly and, in most cases, are short changing themselves. In some other cases they are understating the HST payable and the result could be a lot more grief later on. We do a lot of HST returns for businesses, and in many cases, the result is the person paying less HST to the CRA even if they did their own calculations!

How do I know that, you ask? Excellent question. I have had many clients come to me after they have done their own HST and we have found mistakes and things missed that result in literally thousands of dollars. It is really not straight forward after all!

Whether a sole proprietorship, partnership, or corporation, there are many components to HST.

Should I Register for HST?

There are a lot of people out there who do NOT register when I think they should. I see people leaving money on the table all the time! There is no clear cut answer to this question because every situation is different, but you should definitely evaluate what is right for you. Know the facts, and then decide!

The Basics

If you have more than $30,000 in revenue you are required to register. Of course, then, you are NOT required if you have less than $30,000 in revenue! But that does not necessarily mean that you shouldn’t. Most people get excited when they hear they don’t have to pay a tax, so they just don’t register! That is logical, but it is more complicated than that and isn’t necessarily in your best interest.

There are two more questions you should ask yourself:

1. How much do I pay in expenses for my business that attracts HST?
2. Will charging HST affect my revenue stream?
   • For example, some industries are very price sensitive, so will people stop buying my product or service as a result of the price increase?

If the answer to question 1 is yes, then you are losing out on recovering all that tax that you are paying! BUT that is only if the answer to number 2 is that you will NOT lose business as a result of a 13% price increase.

The Finer Points

You have to make sure you get all the components of the HST when you have a small business. This could include not only subcontractors, materials, advertising, office supplies, and so on, but also home office expense, vehicle expenses, CCA, mileage, etc…

Many of the expenses are not known to small business or they don’t know how to deal with them with regards to HST. This can literally amount to thousands of dollars in your pocket!

For example, let’s say you have $15,000 in expenses that have HST. That is a $2,000 HST tax impact! Money in your pocket!

It pays to know — really.

Still Can’t Decide or Need Some Help?

HST is very complicated and it can be easy to do it wrong and accidentally end up with a lot of grief come tax time. Especially if you haven’t been charging it before now! Don’t be shy about asking for help. I’m happy to offer it! Give me a call or book an appointment today.

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.