Running a small business in Canada is tough. In fact, it’s so tough that 8 out of 10 businesses fail within the first 18 months. So any measures you can take to help your business succeed should be welcomed with wide open arms, and the GST credit is no exception. If you haven’t heard of it, it’s time you find out: businesses can claim back the GST/HST paid on business and operating expenses come tax season, and that can add up to a lot more than chump change. Read on to find out exactly how to get this money back, because your business deserves every leg up it’s entitled to.
If you’re a business with a registered GST number, you’re eligible to claim the GST/HST paid on business supplies. This includes everything from desks to paper, which can add up for many businesses. Getting registered for a GST number right from the get-go is a smart idea. You’ll be able to claim back the tax on all the many purchases you’ll need to make when starting up. Claiming back the GST/HST is simple: just enter the amount you’ve paid under Input Tax Credits (ITCs). Next. input the amount of GST/HST collected from customers throughout the year and then deduct the ITC amount. If you end up with a negative number, then kudos to you, you’re eligible for a refund.
It’s a good rule of thumb to claim your ITCs in the tax season right after the expenses were purchased. This will help keep you organized and ensure you’re maxing out your refunds whenever possible. But sometimes life happens or maybe you just found out about the GST/HST credit.
The good news is that you have up to four years after the claim should have been made to still claim the tax — unless your business had a revenue of more than six million dollars in each of the last two fiscal years. If so, you would have to claim the GST/HST within just two years of the end of the reporting period during which you made the business purchase. The point is, there’s leniency if you forget, which can be a saving grace for hectic business owners.
Keeping receipts for any tax information is crucial, and a GST/HST refund is no exception. The last thing you want is an audit, so ensure you keep receipts up to four years after you submit. Find tips for storing your receipts and staying organized here.
4. Quick Method
If you don’t normally get a refund of your GST/HST payments, the Quick Method might be for you. It was created to help save smaller business time and money, and can make tax season a little less painful. With the Quick Method, you may be able to pay back a smaller portion of the tax received from customers. This is much easier than adding up all the GST/HST collected and then subtracting the tax paid on expenses. If you have minimal business expenses, this can make filing your taxes a lot simpler.
Find out everything you need to know about the Quick Method here. And remember: if you are at all uncertain about anything, contact me. It’s easier to get yourself in order from the start, than to go back and fix mistakes.