Unlock Tax Savings with the Quick Method for filing GST/HST
Unlocking tax savings has never been easier with the Quick Method! This remittance method under the GST/HST program can potentially save your health business thousands of dollars each year. At Tyagi Group, we help clients choose the right GST/HST filing method for them with an annual review, with the goal of saving them more on their filing than our fees! Let's explore how the Quick Method for filing GST/HST works, its advantages, and how to determine if your business is eligible for this tax-saving opportunity.
But first, did you know that you can register for GST/HST early? Get our free guide, “What New Health Professionals Need To Know About Registering Early for GST/HST” to learn if you should register early now!
Short Summary
The Quick Method for filing GST/HST offers businesses tax savings through a reduced remittance rate, simplified filing process and decreased administrative burden.
Eligibility criteria must be met in order to use the Quick Method, with certain types of businesses being ineligible.
Businesses utilizing the Quick Method must remain compliant with CRA requirements by regularly reassessing eligibility and adjusting remittance rates accordingly.
Understanding the Quick Method for Filing GST/HST
The Quick Method is a tax savings method that allows you to remit only a portion of the GST/HST tax charged on supplies of taxable goods and services. By choosing this method, you'll enjoy the advantage of a reduced GST/HST remittance rate, a simplified filing process, and decreased administrative burden. You can change your GST/HST filing method annually, so make sure to review each year the filing option that saves you money!
How it Works
To determine the GST/HST payable using the Quick Method, you'll need to multiply the revenue from sales (including the GST/HST collected) for the reporting period by the applicable quick method remittance rate(s).
For eligible businesses, there's also a 1% credit on the first $30,000 of revenue generated from eligible sales. This credit is available if the quick method election is valid from the start of the fiscal year or, for newly registered businesses, from the day of registration.
Key Advantages
Choosing the Quick Method can result in substantial tax savings annually, up to $1,000 for your business. This is because businesses using this method are not able to claim input tax credits for most purchases, simplifying the process and reducing the administrative burden.
Additionally, the 1% credit on the first $30,000 of revenue generated from eligible supplies can further increase your tax savings, making the Quick Method an attractive option for small businesses.
Determining Your Eligibility
To determine if your business is eligible for the Quick Method, you'll need to check the eligibility criteria and be aware of any ineligible businesses. It's important to verify that your business meets the necessary requirements before electing to use this method.
Eligibility Criteria
To be eligible for the Quick Method, your business must fulfill several conditions. One of these conditions is that your GST/HST-included sales in at least one of the four consecutive fiscal quarters out of the five most recent fiscal quarters must not exceed $400,000.
Keep in mind that some types of businesses, such as lawyers, accountants, bookkeepers, financial consultants, and listed financial institutions, are not eligible to use the Quick Method.
Ineligible Businesses
It's essential to be aware of the types of businesses that are not eligible for the Quick Method for filing GST/HST. As mentioned earlier, lawyers, accountants, bookkeepers, financial consultants, and listed financial institutions cannot use this method.
If your business falls into one of these categories, you'll need to explore alternative tax-saving methods.
Remittance Rates and Calculations
Remittance rates and calculations for the Quick Method vary by province, with different rates for goods resale and service-based businesses. Understanding these rates and how to calculate net tax using the applicable remittance rate is crucial for maximizing your tax savings.
Calculating the Quick Method requires an understanding of the different rates and how to apply them to your business. It is important to understand the different rates and how to calculate net tax using the applicable remittance rate in order to calculate net tax.
Hint: make sure your bookkeeping is set up to track these sales from the start with the Tyagi Group Bookkeeping Template.
Different Rates for Different Provinces
The Quick Method has distinct remittance rates for different provinces, depending on the nature of your business – whether it's service-based or goods-resale. In Ontario, the rate of transferring money for a service-based business is 8.8%. For a business that resells goods, this rate is 4.4%. These rates also differ in other provinces, such as Quebec, where both service-based and goods-resale businesses have a remittance rate of 4.4%.
To be eligible for the initial set of remittance rates, the cost of goods purchased for resale or for use in goods produced or manufactured for sale must constitute at least 40% of your total revenue from annual taxable supplies.
You can review all the remittance rates for goods and services on the CRA Website here.
Calculating Net Tax
To calculate net tax for the Quick Method for filing GST/HST, you'll need to multiply the amount of GST/HST-included eligible sales for the reporting period by the remittance rates applicable to your business type. Additionally, you can apply a 1% tax credit on the first $30,000 of revenue from eligible supplies, further increasing your tax savings.
It's important to note that adjustments for bad debts cannot be accommodated when using the Quick Method to calculate net tax. This is crucial to keep in mind when managing your business's finances and tax obligations.
Electing and Revoking the Quick Method for filing GST/HST
Now that you understand the benefits and eligibility criteria for the Quick Method for filing GST/HST, let's explore the election process, including deadlines and how to make or revoke the election via the Canada Revenue Agency (CRA) My Business Account.
The election process is relatively straightforward. You must complete Form GST74, Election or Revocation of the Quick Method of Accounting for GST/HST, and submit it to the CRA. The form must be submitted within four months of the start of the fiscal year in which you wish to make the election.
Election Process
Before electing the Quick Method for filing GST/HST, ensure that your health business meets all the necessary requirements. Annual GST/HST filers must choose to make an election by the first day of the second fiscal quarter. This applies to their business cycle. The election can be made through the My Business Account on the CRA website or by your accountant using Represent A Client.
Once you've made the election, it remains in effect as long as your aggregate annual revenue (including the GST/HST) from global taxable sales (including zero-rated supplies) does not exceed $400,000 or until your business is no longer eligible for the quick method.
Revoking the Election
If you wish to revoke the Quick Method election, you can do so through the CRA My Business Account. Keep in mind that if you revoke the election, you must wait for a period of at least one year before it can be reactivated. Additionally, Input Tax Credits for any taxes paid or payable on purchases made while utilizing the Quick Method cannot be claimed, except for the Input Tax Credits that would have been eligible for claiming but were not claimed while the Quick Method was in use (ex. capital assets, leasehold improvements, furniture, etc.)
It's crucial to weigh the pros and cons of revoking the Quick Method election before making the decision, as it may impact your business's tax savings and financial obligations.
Recordkeeping and Filing GST/HST Returns
Maintaining proper records and filing GST/HST returns accurately is essential for businesses utilizing the Quick Method.
Let's explore the recordkeeping requirements and filing process in more detail.
Recordkeeping Requirements
Businesses using the Quick Method must maintain all books and records pertaining to their business purchases and supplies for a period of six years following the year to which they are applicable. This includes documents such as invoices, receipts, and contracts, as well as any other relevant financial information.
Proper recordkeeping is crucial for ensuring compliance with the CRA's requirements and avoiding any potential penalties or audits. It's essential to stay organized and maintain accurate records when using the Quick Method for filing GST/HST. Not sure if you are doing your recordkeeping correctly? Let Tyagi Group’s Bookkeeping team take the administrative burden off of your hands! Book a FREE discovery call to learn more.
Filing GST/HST Returns
When it comes to filing GST/HST returns using the Quick Method, you'll need to follow the specific steps outlined by the CRA. If you need to use one remittance rate, adhere to the steps and only fill out the applicable lines of the return. If more than one remittance rate is required, follow the instructions for each rate separately.
It's essential to stay up-to-date with the latest guidelines and requirements from the CRA when filing your GST/HST returns. This will ensure that your business remains compliant and can continue to benefit from the tax savings offered by the Quick Method for filing GST/HST.
Adapting to Business Changes
As your business evolves, it's important to reassess your eligibility for the Quick Method and adjust your remittance rates accordingly. Staying informed of any changes to your business's eligibility status will help you continue to maximize your tax savings.
Reassessing Eligibility
To reassess your eligibility for the Quick Method, you should review the eligibility criteria on the CRA website and confirm that your business still meets the requirements. If your business undergoes significant changes, such as adding a new service, purchasing the operations of another firm, or altering product lines or sales patterns, reassessing your eligibility is essential.
If you find that your business is no longer eligible for the Quick Method for filing GST/HST, you'll need to take the necessary steps to switch to the regular GST/HST reporting method. If you’re not sure if you qualify for the Quick Method or how to choose which filing method is the best for your business, book a FREE discovery call to learn how Tyagi Group can help you.
Adjusting Remittance Rates
If your business is no longer eligible for the Quick Method, you should begin using the regular method to calculate your GST/HST remittance. This will make sure that your business remains compliant with the CRA's requirements and can continue to benefit from any tax savings available under the regular GST/HST reporting method.
It's essential to stay informed of any changes to your business's eligibility status and adjust your remittance rates accordingly. This will help you continue to maximize your tax savings and maintain compliance with the CRA's requirements.
Summary
The Quick Method for filing GST/HST is a valuable tax-saving tool for eligible small health businesses in Canada. By understanding how it works, its key advantages, and the eligibility criteria, you can unlock significant tax savings for your business. Staying informed of any changes to your business's eligibility status and adjusting your remittance rates accordingly is crucial for maintaining compliance and continuing to benefit from this method. Take advantage of the Quick Method to simplify your tax filing process and maximize your business's tax savings.
Learn the best time to register for GST/HST and what to do after with GST/HST For New Health Businesses: The online course to understand and meet your GST/HST requirements for your new Canadian health business. Don't miss out on saving money in your return or run into penalties because you didn't file your GST/HST correctly. Check it out!
Frequently Asked Questions
Do I have to pay GST/HST if I make less than $30,000?
Paying GST/HST depends on the person you are purchasing your goods and services from. For example, if you are purchasing items from a large company, like Google, they are registered for GST/HST, and so they have a requirement to collect on sales they make. If you purchase your goods and services from smaller businesses, you may not have to pay GST/HST if the person you are purchasing from is not registered and does not have a requirement to collect.
Do I have to collect GST/HST if I make less than $30,000?
No, you do not have to y GST/HST if you make less than $30,000 per year. The Small Supplier Threshold means that businesses that make less than $30,000 in four consecutive calendar quarters (i.e., in a year's time) are not obliged to register for the GST-HST and so don't have to charge or pay it.
What is the formula to extract GST/HST?
The formula to extract GST/HST from a price is Total Price (including GST/HST), HST Rate divided by 1 + GST/HST Rate.
To calculate the exact amount of GST/HST extracted, you need to substitute the Total Price and the corresponding HST Rate in this formula.
(ex. in Ontario, $56.50/1.13 = $50 subtotal, and the rest of the price is HST paid)
How fast can you get a GST/HST number?
Getting a GST/HST number is straightforward and can be done quickly. You can register at the CRA's Business Registration Online or call the CRA's business inquiries line at 1-800-959-5525.
With any of these options, you'll get your GST / HST number right away.
How do you calculate GST/HST with the quick method?
Calculating GST/HST using the Quick Method is a simple process. Simply add together your sales and GST/HST collected, then multiply by a percentage based on your business activity.
In Ontario, for example, if you're selling goods, you'd use 4.4%. Calculating GST/HST has never been quicker!
What is the quick method of GST?
The Quick Method of GST is a simplified tax collection system which allows businesses outside the HST provinces to remit a flat rate of 3.6% of GST-included sales (3.78% of sales) minus $300 instead of claiming input tax credits and 5% of sales.
This streamlined method offers businesses an easy and time-efficient way of filing taxes.
