Clear the Clutter and Stay Organized!

Is your home office/workspace bursting at the seams with clutter and paperwork?
If so,natural-home-office-ideas-form-wood-on-the-table-drawer-and-cabinet-for-woman that clutter may be keeping you from effectively managing your business.  Surrounding yourself in paperwork and clutter only adds stress to the already overwhelming job of record-keeping and paperwork.  Here are a few tips that may help you get organized and reduce that awful stress:

  1.  TRASH all papers you will not need anymore.  As your business expands, so does the volume of mail you receive.  Get in the habit of opening your mail everyday and sorting through it.  Keep all the important paper and trash the rest.  Get rid of flyers, empty envelopes, boxes, plastic wrapping etc immediately so they don’t collect and clutter your space.  Of course, we encourage you to recycle what you can into a recycle bin and trash the rest!  You will need to make space for all of the new files you are about to create.
  2. ORGANIZE your papers and other items in your workspace.  This may mean a trip to the office supply store.  You may want to use ring binders, file folders and file boxes to keep documents together.  Small desktop organizers will keep your pens, paper clips, note pads and other small items together in an easy to find place – there is nothing worse than constantly searching for that pen you know you just had!!   A small cork or magnetic board will be helpful for posting important reminders, calendars or other items you don’t want to get lost in the paper shuffle on your desk.
  3. FILE your documents on a weekly basis.  Make it a point to spend some time every week dealing with the documents on your desk.  If it works for you, pick one day a week that is dedicated to office/paperwork – I like Fridays!  Once you have dealt with a document, file it away.  Searching for documents can eat up so much time that could have otherwise been more productive.  Create yourself a filing system that you understand and works well for your business.  Add labels to file folders, file boxes or even drawers.  That way you will know exactly where to put your documents when filing and where to look when you need something at a later time.  If you can stick to a weekly routine, the paper clutter will stay at a minimum and make the task less overwhelming.
  4. FREE your space of useless dust collectors.  Even more expensive items can be considered clutter if they do not serve any functional or aesthetic purpose.  They may include old office furniture or outdated electronic gadgets no longer in use.  Gather cables and cords under your desk or workspace. Tie them together with twist ties, zip ties or anything to keep them from getting underfoot and creating hazards.
  5. CREATE more storage space by building multiple shelves against a wall.  Higher shelves can hold files and papers that you are not currently working on while the lower ones can be used for those you need on a daily basis;  perhaps lighter items on the top shelves with heavier boxes  on the bottom.  Shelves are generally inexpensive, but if that is not an option, then perhaps try stacking file boxes or filing cabinets. Remember to label them!
  6. BRIGHTEN your office with desk lamps, brighter lighting or windows.  A dark working environment is not conducive to productivity and good business.  Dim lights tend to make the work area gloomy and you to feel lethargic.  You will most likely avoid your paperwork if your workspace is dark and dingy.

 

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Can you afford not to file?

I attended a workshop recently where part of the discussion was about how the Canada Revenue Agency penalizes those who do not file and/or pay their taxes on time.  It got me tTaxes-Dueo thinking that most people do not truly understand the importance of filing those tax returns by the deadlines set out by CRA.

In slower economic times, like the recession we are in today, business owners get nervous about filing their tax returns- personal, corporate, GST etc. Some even choose not to file because they do not want to see the tax bill, nor do they think they can afford to pay their taxes.

cIt is important to understand a few terms before we go into an example of what it can cost to be a late filer.  First, the term FILE means to report.  That is what happens when a GST return or personal (T1) and corporate (T2) tax returns are submitted to CRA.  They are filed.  This is where the biggest penalty lies – failure to file.

The second term is REMIT.  Remit simply means to send payment.  Interest is charged on amounts that the taxpayer does not remit by the deadline.  I find it difficult at times to help our clients understand the difference between those two and the importance of the filing deadline.

The Canada Revenue Agency imposes a penalty on those who file (report) late as well as interest on any overdue remittances (payments). The following excerpts from the CRA website explain how they calculate those penalties and interest:

Late filing penalty for personal/corporate tax returns:

“First offence – If you owe tax for 2015 and do not file your return for 2015 on time, we will charge you a late-filing penalty. The penalty is 5% of your 2015 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

Second offence – If we charged a late-filing penalty on your return for 2012, 2013, or 2014 your late-filing penalty for 2015 may be 10% of your 2015 balance owing, plus 2% of your 2015 balance owing for each full month your return is late, to a maximum of 20 months.”

Interest charged on late personal/corporate taxes owing:

“If you have a balance owing for 2015, we charge compound daily interest starting May 1, 2016, on any unpaid amounts owing for 2015. This includes any balance owing if we reassess your return. In addition, we will charge you interest on the penalties starting the day after your return is due. The rate of interest we charge can change every three months. See Prescribed interest rates.

If you have amounts owing from previous years, we will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.”

Example1

OK- lets use the example given at our workshop to break this down for easier understanding

 Based on Susie’s income for 2015 she has personal taxes owing of $35,000.  She has not made any remittances (payments) throughout the year.  Now she is nervous about filing her tax return because she doesn’t want CRA to find out how much her income was or how much she owes in tax.  She saves up what she believes will be enough to pay what she owes by Sept 30, 2016 and files her 2015 tax return on that day (5 months past the Apr 30 deadline).

PENALTYInstead of owing $35,000, Susie now owes:

$35,000  tax owing for 2015 + $3500 penalty for late filing (5% of $ owing + 1% for each late month) + $1951 interest compounded on late payment = $40,451.00!!

Although nobody wants to pay interest, it is obvious from this example that Susie would have been far better off to accept that she would be late making her remittance (payment) and gone ahead and filed her return on time.  She could have saved herself $3500!  The interest alone added to the tax owing would have been more manageable than the total cost after the late filing penalty was added.

****It is important to note here that penalties for failing to file (report) GST returns are slightly different and can be found on the CRA website, but the effect is the same – failure to file is extremely punitive!!

If I could give one piece of advice to our clients, it would be:

DO NOT avoid paying your taxes by choosing not to file your returns on time.  DO NOT procrastinate with your bookkeeping so that your GST/Tax filing is late.  Meet those deadlines and get those returns filed on time!

Can you afford not to??

 

 

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How do I reduce my bookkeeping bill?

Economic downturnIn times of economic downturns, businesses start looking for ways to reduce their expenses.  While reviewing your business activities on a regular basis is absolutely essential to your business success at all times, it is even more important in times like we are facing today.

Be careful, however, when cutting costs that you are not cutting those that are most important to your business.  Many businesses will decide to cut their bookkeeping expenses and “let the spouse take over the books”, “figure it out myself” or “let the accountant deal with it at tax time”.  All of these plans will cost your business more than it will save in the long run and here’s why:

  1.   Often the spouse or business owner thinks that doing books can’t be that hard so they will take care of it themselves.  Often they find that there really is more to bookkeeping than they originally thought.  Bank statements need to be reconciled, Accounts Receivable and Accounts Payable need to be tracked, payroll can be complicated, source deductions need to be calculated, GST returns need to be filed, the sale or purchase of some items need to be recorded in capital assets, records need to be organized and so on.
  2.     to doTaking the time to look after their own bookkeeping  keeps the business owners tied up with paperwork when it really is more important for them to be out working or selling their business to perspective customers.  After all, those sales are what keeps the business operating, right?  They can’t make a sale while reconciling a bank statement.
  3.     In tougher times, businesses may need to apply for financing of some form or another.  The first thing banks or other lending institutions will ask for are the
    Loan applicationsbusiness financial statements.  If the bookkeeping is not up to date, or the business owner is unsure of how to report the business activities, it can cost the business that needed loan! Especially in times like this, it is important to be able to supply the bank with the current information.
  4.     Letting an accountant look after it at tax time will most definitely cost the business more than necessary.  If an accountant has to wade through a year of receipts, invoices, statements etc., you can bet that will not come cheap.  An accountant’s time is valuable and costly.  Keep that time at a minimum so they can concentrate on helping  with business decisions, financial planning and more.  That cost is far more valuable than having them sort receipts!

Accounting humor1

So….rather than cutting the bookkeeping costs altogether, consider these pointers to help you reduce the cost for that service:

  • When you pay a bill, get in the habit of writing on that bill with as many details as you can.  How was it paid?  Credit card? Business debit? Personal debit? Personal cash? Cheque?  What cheque number?  Date it was paid? Often we see receipts that don’t tell us what was purchased or we can’t decipher the abbreviations to determine what the item was.  Make a note of what is was because in the event of an audit 3 years down the road, you will not remember and we may be recording it to the wrong expense account.  Staple the paid receipt to the bill if you have it
  • Get in the same habit for customer payments received.  What account was it deposited to?  What day was it deposited?  What invoices have been paid with this payment?  If you can attach the deposit slip to all the customer invoices that were paid in that deposit, then even better!
  • Provide your bookkeeper with any outstanding sales invoices or bills to be paid.  Your bookkeeper will want to provide you (and possibly your banker) with monthly reports regarding what is still receivable in your business and what is still payable.
  • SortSort your receipts by month, then by payment method.  If it was paid by a credit card, attach it to the corresponding credit card statement.  If it was paid by cheque through the bank account, then attach it to that bank statement and so on.  Any receipts for business expenses that were paid with personal funds can be attached together in the corresponding month with a note to indicate that they were paid by personal means.  It is important to record those business expenses and to track how much the business owes back to the shareholders/owners.
  • Make notes on the bank or credit card statements regarding transactions that may not be self explanatory.  If funds were transferred in or out, where did they come from or where did they go?  If loan payments are withdrawn, which loan is it paying?
  • If you do your own payroll, provide your bookkeeper with all of the payroll details for the month.  What deductions were taken off the employee cheques?  What advances were paid?  When? With what cheque number?  What source deduction payments were made?  What are those detail amounts?  When was it paid?
  • Take your records to your bookkeeper on a timely (monthly) basis.  It will be easier for you to remember what happened in your business in the last month than if you are asked for more details about a transaction that happened 6 months or a year ago.  Your banker will thank you for the up to date records as well!

happy happyFollowing the above tips and spending a little more time prepping the paperwork for your bookkeeper will benefit you two-fold.  Firstly, your books will be up to date in good order and secondly, you will have cut your bookkeeping costs.  Both mean good news for your bottom line!!

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Changes in GST/HST returns coming…

You may have recently received a notice in your mail from CRA regarding the changes they will be making to the GST/HST return access codes and forms.mailbox

If you haven’t received a notice (or if you happened to just throw away the extra paper in the envelope, LOL!) here is a quick summary for you so you know what to expect in the coming months….

  1.  You will remember that each quarter, month or year that you received a GST return form, theaccess codere was a four-digit access code on the front page.  Each form had a different code and if you misplaced it, you had to contact CRA to get a new one so you could file your GST online for that specific period.  Starting Oct. 19, 2015 the CRA will be sending all GST registrants a “new and unique” access code.  This code will be used for all future returns and you will not be receiving a new one each time.  You will also have the ability to change that access code to one of your own choice by going to the CRA website for Access Codes .  Just remember that if we file your GST return for you (and if we don’t already have business consent from you on file) then you will need to let us know what that new access code is so that we can continue to file on your behalf.
  2. Also starting on Oct, 19, 2015 the frequency in which you receive your forms will change.  Instead of receiving a new form each time you are required to file another return, you will receive a package that contains your new access code, a list obank tellerf your reporting periods with the due dates and all of the remittance vouchers for the entire fiscal year.  Please don’t misplace these.  If you do not pay your GST online, but rather pay it at the bank, you will need those remittance vouchers.  If you bring them in to us, we will be happy to hold them for you for safekeeping!

So there you have it!  Starting Oct. 19, we encourage you to watch for the above information that will be coming to you and, if we are your bookkeepers, we ask that you bring that information and forms into us so we can continue to serve you efficiently.

Quick tipThere’s an App for that!  There is an app available to you that we recommend downloading if you tend to forget your remittance due dates for GST, payroll, corporate tax etc.  This CRA Business Tax Reminder mobile app allows you to create reminders and alerts for your critical dates with CRA.  Go the the CRA website to download the mobile app .  I use it and find it very helpful.

 

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Four Quick tips for handling your receipts

At this time of year, with tax season in full swing, we often see clients that we have not seen since last year at this time.  They come to us with their receipts and paperwork for the entire past year and ask us to record their bookkeeping in preparation for tax filing.

buried in paperwork  One of the most asked questions we receive from these clients is “What can I do to be better organized for next year?”.  I know just by hearing that question what it is they have been going through before arriving in my office. They have just spent countless hours going through a mountain of paperwork to get it into some type of order before bringing it in to us.  They have waded through piles of small cash register receipts (probably already fading) looking for that hard to find date just so they can put it in the right pile!  How stressful, time-consuming and boring!

Here are a few quick tips to help you stay organized throughout the year and to help preserve those important receipts:

1.  Develop a simple routine for dealing with paper (including receipts) as soon as it comes into your hands (and follow it!)

Maybe one of these ideas will work for you:

  • Keep a day-timer, envelope, pocket divider etc. in your vehicle.  Every time you get into your vehicle after having just made a purchase, put the receipt in it.  Do it EVERY time so it becomes a habit and eventually you do not need to think about it.
  • Keep monthly folders in your house or office.  For each bill paid, each receipt received, each invoice you’ve sent, put it in the folder of the appropriate month.  When the credit card and bank statements come for that month, put them in there too.  If you use the first routine, this would be a good time to empty it out and include them in the monthly folder as well – that month is now ready to take to your bookkeeper.
  • Keep all of your paperwork in one place – use a file cabinet, bankers box, plastic file box.  That way you never have to think about where you might have put a receipt, statement or invoice and you will never have to waste time looking for one that has gone astray. (If you have ever torn your truck apart looking for that one missing receipt, you will understand how important this is!) If you take your paperwork to a bookkeeper once a year, then everything is together in monthly folders all in one place.  Pick up the box and go.

2. When you get a receipt, look at it, fill in any missing or faded information and write on the back what it was for – DO THIS ON THE SPOT! 

There are many cash register receipts that do not provide details of the purchase – you think you will remember what you bought there, but you won’t.  Sorry – but its the truth – you will not remember!  Take a moment or two to make a quick note of what the items were if they are not listed on the front in a way you can understand.  Often the abbreviations of the purchased items make sense to you at the time, but 12 months later they may not.  Your bookkeeper may not be able to determine what the purchase was for either if they are trying to decipher the codes and abbreviations.

There is nothing more frustrating than trying to decipher a date or a product long after the fact when it is finally time to begin the data entry.  Dates can be particularly annoying as different businesses have the date setting on their receipts in different orders.  Is 01-08-14 January 8th or Aug 1st?  Write the month on the receipt when you receive it.  (Then take it home or to the office and put it in the correct month folder from above!)

This is an especially important step for meal receipts.  CRA requires the following information on every meal receipt:

  • who was in attendance
  • the purpose of the meeting
  • what was discussed pertinent to your business

3. If you  must fold a receipt, fold it so the printed side is uppermost.

folded newThat way, it will be easier to find the receipt of you ever have to look for it.  When you fold a receipt so that the printed side is hidden, all receipts look alike and you will have to unfold them all to find the receipt you want. Not to mention it takes your bookkeeper a much longer time to sort through your receipts when they all have to be unfolded first!

4.  Don’t let the data entry pile up.

If you have a bookkeeper, deliver your receipts on a regular basis.  Weekly, monthly or even quarterly throughout the year.  If your bookkeeping is done on a regular basis, then any questions that may arise will be easily remembered and clarified in the data entry.  Trying to remember what that January 2013 expense was for when you are in February of 2014 can be stressful and difficult.

buried newIf you are doing your own bookkeeping and data entry, schedule a time every week or month and stick to that schedule.  If you don’t, you will likely put it off and your piles of receipts will become even more unappealing and overwhelming.  You will always find something more important and interesting to do if you don’t schedule a time and force yourself to do it.

Follow these 4 steps and you will find that your paperwork will be better organized, it will be much easier to lay your hands on the exact receipt or invoice you are looking for and the stress at year end will be far less.  Happy sorting!

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Preparing for the end of your fiscal year…

end-of-year-calendar 
As a business owner, you have probably heard your bookkeeper and accountant talking about your “Fiscal Year” or year-end.  This may have lead to your questions of  “
What is a fiscal year and when is it?”

Your fiscal year is the tax year or financial year of your business.  Depending on the type of business you own (see previous posts) your fiscal year may vary.

If you are a sole proprietor, your fiscal year will be January 1st to December 31st.  If you are a corporation, you may have a year ending date other than December.

If you have just incorporated your business, you have to decide on a year-end date within the first 12 months of incorporating. It doesn’t have to coincide with the anniversary of your incorporation date, nor does it need to coincide with the end of the calendar year. Your ideal year-end really has more to do with your business cycles, which vary from business to business.   In my business, I have chosen November 30 to be my fiscal year end.  Therefore, my fiscal year is December 1 to Nov 30 every year.  My corporation files a corporate tax return every year for that time period.

checklistRegardless of when your fiscal year end falls, the preparation for that time is relatively the same.  Gather the following information and take it to your accountant or tax preparer at the end of your fiscal year so they can prepare your income tax for you:

  • all bookkeeping records for the year – if you have been recording your business transactions in a software program, make a back-up of that data file onto a CD or USB that you can give to your tax preparer.  If you have been recording those transactions in a manual ledger, take the ledger (and find someone to help you start using a software program).  You may want to hire the services of a bookkeeper to help you enter your data into electronic form.
  • Bank statements for the year as well as the month following the year end
  • Credit card statements for the year
  • Loan statements for the year
  • all GST returns filed for the year
  • a list of Accounts Receivable you had at year end (indicate if there are any receivables you believe to be noncollectable)
  • a list of Accounts Payable you had at year end
  • invoices/receipts of all large, capital items you purchased over the year (i.e. vehicles, large equipment, office equipment & furniture – generally anything you purchased that was $500 or more for a single item that you will continue to use in  your business over a period of time)
  • all correspondence you may have received from the Canada Revenue Agency over the year in regards to your business account for GST, payroll or corporate tax.
  • All payroll records and remittances submitted to CRA
  • Motor vehicle records – your log book with totals of personal vs. business kilometers
  • Receipts for charitable donations made throughout the year

records1Being thorough and detailed in your record keeping will assist your tax preparer file your tax return timely and accurately.

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Boxing Day – A statutory holiday or not?

Wow!  How time has flown by this month.  We are just over a week away from Christmas Day!  With that comes the question about holiday pay for your employees.

calendar_entry_for_december_25_christmas_day_0521-1012-0313-5207_SMU

We all know that Christmas Day is a statutory (general) holiday across the country, but what about Boxing Day?  Under the Employment Standards Code, Christmas Day is recognized as a general holiday, however, Boxing Day is NOT.  But be careful…

Under the Employment Standards code, the following days are recognized as general (or STAT) holidays:

  • New Years Day – Jan 1
  • Alberta Family Day – Third Monday in February
  • Good Friday – Varies with the religious calendar
  • Victoria Day – Monday immediately preceding May 25
  • Canada Day – July 1 (when it falls on a Sunday the STAT is on Monday)
  • Labour Day – First Monday in September
  • Thanksgiving Day – Second Monday in October
  • Remembrance Day – Nov 11
  • Christmas Day – Dec 25

boxing-day

Easter Monday, Heritage Day (in August) and Boxing Day are not recognized as general holidays in Alberta.  However – and this is the “Be Careful” part – an employer can designate these or any other day as a General Holiday in addition to the 9 holidays listed above.  If an employer does so, the extra holiday(s) shall be paid in exactly the same way as the legislated holidays.  If an employer at any time wants to revoke an “extra” holiday, employees must be notified (preferably in writing) prior to the pay period in which the holiday falls.

In other words if,  as an employer, you say to your employees “We are closing because it is Boxing Day”, then you must pay them as though it is a STAT holiday.  If you tell them you are changing your hours this week and you have decided to be closed on that day, then you have not designated it as a holiday.  It’s a very fine line – isn’t it?

If you have always paid your employees the General Holiday pay for Boxing Day and you choose not to this year, then they need to be informed in writing in the pay period prior  – so unfortunately, I may have posted this too late for some of you – sorry!

Another popular question around General Holidays is who qualifies for the STAT pay?

  • First – an employee must have worked for you for 30 days in the previous 12 months (they do not need to be consecutive days – just 30 sometime throughout the year)
  • If the holiday falls on a regular day of work
  • If your employee works on the General Holiday
  • If your employee has an irregular schedule, it can be difficult to determine whether the holiday falls on a regular working day.  The way to make that determination is to look back at the last 9 weeks.  If the employee has worked any 5 of the same day as the holiday falls in the last 9 weeks, then he is entitled to receive holiday pay.  For example, with Christmas Day being on a Wednesday this year, if your employee has worked any 5 of the last 9 Wednesdays, then you must pay them Holiday Pay.
  • RE_FAQThere are many other rules regarding qualification, holidays worked, holidays not worked, calculating average daily wage for the holiday etc.  Please refer to http://humanservices.alberta.ca/documents/General-Holidays-and-General-Holiday-Pay.pdf for more information.

I wish you all a very Merry Christmas and a prosperous New Year!  Enjoy your holidays 🙂

 

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Hiring Credit for Small Businesses

If you are an employer, you will be interested to learn that the Canada Revenue Agency has extended the Hiring Credit for the 2013 payroll year.

economic

The CRA website says:

“The 2011 federal budget created a hiring credit for small business (HCSB), a credit intended to stimulate new employment and support small businesses. The 2012 federal budget extended the HCSB for 2012. The latest federal budget proposes to expand and extend the HCSB for 2013.

The HCSB gives small businesses relief from the employer’s share of employment insurance (EI) premiums paid in a year. It does this by crediting up to $1,000 on the payroll account, based on the increase in an employer’s EI premiums paid in one year over those paid in the year before.”

now hiringTherefore, if you have hired more employees, or increased the hours worked by your employees through 2013, then you will qualify for a credit in 2014.  You do not need to apply for this credit, as CRA will calculate it for you based on the amount of your increase to determine how much of a credit you are eligible for (to a maximum of $1000).  You will receive a notice on one of your Source Deduction forms (PD7A) to let you know how much you qualified for.

Once you know how much that amount is for your business, you can reduce the amount of a Source Deduction remittance by that amount.  Be sure to record that credit amount in your EI expense account.  If you use a bookkeeper or other payroll provider for your payroll completion, be sure to give them the notice you receive so they can make the appropriate adjustments in your bookkeeping.

 

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We all LOVE Christmas bonuses…

It is coming up to that time of year again where businesses are starting to think about Christmas parties and whether or not they will be giving their employees a Christmas bonus.  If you are an employer, be sure you understand what is involved with paying that bonus.

ScroogeIt is important to remember that all bonuses are taxable and must have deductions calculated and remitted to CRA.  If for example you wish to give an employee a $500 bonus, the cheque should not be written for $500 as it needs to have the appropriate tax taken off first.  Also, the extra $500 should not simply be added to the gross amount of pay for that employee.  The deductions for that bonus need to be calculated seperately.

If at all possible, the bonus should be paid on a regular payroll cheque with a separate line on the paystub indicating the amount of the gross bonus.  By creating a seperate cheque for the bonus, it will change the number of payments issued to a monthly, semi-monthly or bi-weekly employee and may result in incorrect reporting on the T4s at year end.

 If you need some assistance to determine your bonus deductions, please contact us at the office and we would be happy to help.  Please have the amount of the regular pay for that pay period ready, as well as the total of all other bonuses that may have been given throughout the year.  We will need those amounts to make the correct calculations for both the bonus and gross paycheque.  Otherwise, you can determine the correct calculations by using the Canada Revenue Agency Payroll Deduction Calculator on the CRA website at http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/pdoc-eng.html

 

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Registering for a GST number: Do I really need one?

In my opinion, the answer to that question is YES!

maple leaf The Canada Revenue Agency does not require you to register for a GST number if:

You are a small supplier and you meet one of the following conditions:

■ you are a sole proprietor and your total revenues from taxable supplies (before expenses) from all of your businesses are $30,000 or less in any single calendar
quarter and in the last four consecutive calendar quarters; or

■ you are a partnership or a corporation and your total revenues from taxable supplies (before expenses) are $30,000 or less in any single calendar quarter and in the
last four consecutive calendar quarters; or

■ you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority) and your total
revenues from taxable supplies from all of the activities of the organization are $50,000 or less in any single calendar quarter and in the last four consecutive calendar quarters. A gross revenue threshold of $250,000 also applies to charities and public institutions. For more information, see Guide RC4082, GST/HST Information for Charities.

In all of these cases, if you do not have a GST number then you will not charge or collect GST on any of your revenue.

GSTAlthough generally, you do not have to register for GST if your revenues are $30,000 or less per year, you can register voluntarily.  I often recommend to my clients who are just starting up a new business that they do voluntarily register for their GST number. Why?

These are the reasons I give:

  • Even if you do not anticipate that your business will reach the $30,000 revenue mark in the first year, everyone starts a business with the intent that someday it will grow. As your business grows and you begin to reach that level of sales, you will need to apply for your number at a later date anyway.  It is easier and more beneficial to you to apply now rather than later.
  • money backEspecially in the start up stages of a new business, there can be huge expenses when getting a business off the ground – even before the revenue starts coming in.  You may find yourself making large purchases for equipment, inventory, office supplies & furniture, rent, etc.  If you have voluntarily registered for a GST number, you are eligible to claim the GST you spent on those items (that GST is referred to by CRA as Input Tax Credits or ITCs) and receive a refund or credit.  At that stage, getting that GST  back can mean a lot to the balance of your bank account. If you can get back some of what you spent, then why wouldn’t you?  If you choose to apply later, you will not be allowed to go back in time to claim that GST paid.  It will be money lost. You can only begin claiming those ITCs from the date your GST number takes affect.
  • You may come across some clients who will only do business with other businesses who have registered for GST.

If you decide to register voluntarily, then you have to charge, collect and remit GST on your sales of goods and services.  You will have to file GST returns on a regular basis.  You will also have to stay registered for at least one year before you can cancel your registration (unless you stop your commercial activities).

If you decide not to register, then you cannot charge GST to your customers and the GST you pay on your business purchases becomes a cost for which you cannot claim ITCs.

 

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