Okay. I may have oversold that last tip, since clearly this explanation of GST/HST is longer than one sentence.
But hopefully it’s still making sense, which is more than we can say for most things in this world. If you’re still with me, read on…I promise it won’t hurt a bit.
As we said in our previous Tip, the GST/HST system is comprised of three steps:
1. Collect GST/HST on sales and spend it on business expenses
2. Report to the government how much you collected and how much you spent
3. Remit the difference (or claim a refund, if you spend more than you collected)
Step One was discussed in our earlier post.
Step Two: Reporting to the government.
How does the government know how much you are supposed to remit, and how much they are supposed to give you back? You tell them, by means of filing a GST/HST return stating how much you collected and how much you spent. Making the calculation and communicating that to the government is what it means to file a return.
In other words, you have to file returns; it is not enough to just send the government money. So even if you’re remitting HST throughout the year, if you’re not ALSO completing your returns, CRA doesn’t really know what the money is for, or whether you really owe it, or what to do with it.
How often you must file a return depends on what you have agreed to with CRA. You can file annually, quarterly or monthly. Here at Personal Tax Advisors we generally prefer sole proprietors to choose annual filing, because a) either way we have to do all the GST/HST calculations for our clients during our annual tax appointment in order to file their personal income tax returns properly, and b) from there we can easily put together a GST/HST return that spans the same period.
Plus, the deadlines are the same: sole proprietors with annual filing periods get an extended filing deadline of June 15, which conveniently is also the filing deadline for personal income tax returns for all self-employed people and their spouses.
Filing quarterly or monthly is also an option, though only required if you are grossing at least 1.5 million per year.
So why would anyone volunteer to file four or even 12 times as many GST/HST returns per year than they have to? Is it because they love paperwork? Maybe. (As a child I loved eating paper, which is why the dustcovers on my parents’ books from the 1970s are…gone.) But usually it’s because people don’t want to have GST/HST (which they know they can’t keep) build up so that they become tempted to spend it, and they don’t realize that there is another way to deal with the issue that isn’t nearly as much trouble.
Which brings us to…
Step Three: Actually paying the government.
The important thing here is to note that remitting (or ‘paying’) is a separate step from ‘reporting.’ As with income tax returns, it is a common misconception that filing a return and paying your bill are a single, indivisible thing. But that’s no truer of GST/HST than it is of of a Hollywood marriage. They absolutely can be uncoupled.
But that, as they say, is a topic for another day.
Did you know? Personal Tax Advisors will calculate and file your GST or HST return for free.