In this article we are going to look at the Quick HST Return method of accounting for fast HST return filing. This is part one of a two part series, and it shows you a very simplified way of figuring out how much HST you have to remit to the government.
If you are a small business owner or a sole proprietor this is going to be very beneficial for you because this is going to show you exactly what you can do to save a lot of time and hassle figuring out how much HST you have to give the government.
Are you Eligible for a Fast HST Return?
In order to be eligible for this fast HST method of accounting, you have to make sure your total revenue does not exceed $200,000 and that you are not a person listed under the exceptions list. The exceptions list is available in full detail on the Canada Revenue Agency website.
What I have here is a very simplified list. As part of this list, if you are an
• Financial consultant
• Financial institution
• Government organization
• Health care provider
• Charity or an NPO with at least 40% of your funding coming from the government
then you are not going to be able to use quick method of accounting. However, if you are not, you can use this quick HST return method of accounting if you meet the other criteria.
Going Through With It:
How do you go through this fast HST return method if you are eligible? Simply write a letter to the Canada Revenue Agency explaining your election by the first day of the next fiscal quarter. What that basically means, for example, is that if you want to use the quick method of accounting for your December 31st, 2011 fiscal quarter then you would have to make sure you write a letter to the Canada Revenue Agency by January 1st, 2012.
A simple rule of thumb for most small business owners is that if you want to use the quick method of accounting for the entire year, I would highly recommend making sure that the Canada Revenue Agency gets the letter by the 28th of the year you want to use it for.
How Quick HST Return Works:
How does the quick HST return method of accounting work? It’s very simple. All you do is collect 13% from your customers, and then, you only remit 8.8% to the Canada Revenue Agency after applying a 1% credit for the first $30,000 in sales. Everything else, you keep, and that is the amount you don’t have to remit to the government.
In order to walk you through the entire fast HST return process let’s go through a fictional client here, Bob, who runs a small auto repair shop and has a $100,000 in sales for 2011. He has elected to use the quick method of accounting for the entire year and we know his HST collected is $13,000.
The calculations would work as follows.
1. Total sales for the year including HST equal $113,000.
2. We will multiply that by the eligible rate of 8.8%, which gives us the Quick Method HST, which is $9,944.
3. However this is not the amount we remit because we also have the 1% deduction on the first $30,000 of sales. In this case, the amount of HST we have to remit is $9,644; everything else, Bob will get to keep.
The next article will talk about how to actually apply this quick HST return method on the HST return. To learn more about calculating HST, click here.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.