Its simple. Time. Money. Stress. Those are the costs of not filing properly.
How many parents have lectured their kids about the benefits of developing good habits by doing all the prep work needed for a school assignment well in advance and to complete the work before the actual due date?
Unfortunately, we don’t all take our own advice when it comes to our taxes, particularly filing HST remittances accurately – and on time.
Ontario introduced the Harmonized Sales Tax (HST) July 1, 2010 which effectively moved the province from a provincial sales tax system to a single federally administered system.
The Canada Revenue Agency web site has a wealth of information to help business owners understand the finer details of filing their HST return. But several key points should be reinforced.
Don’t be late.
Your annual sales determine how many times a year you have to file your HST return.
You must prepare and send an HST return for each reporting period.
The report will indicate the amount of HST you collected from your customers plus the amount you paid or owe to your suppliers.
Your specific reporting period is assigned to you when you initially register for your HST account.
If you have a monthly or quarterly reporting period, you have to file your return and remit payment owing no later than one month after the end of your reporting period.
On the other hand, if you are remitting annually, you have to file your return and remit payment no later than 3 months after the end of your fiscal year.
Your accountant will help you sort through all the exceptions to the rules.
Certain registrants have to file electronically.There will be a penalty if you are required to file electronically and fail to do so.
According to the CRA site, an initial failure to file electronically will result in a fine of $100. Each later failure will result in a $250 penalty.
If the fine for filing late is not enough, it gets more complicated.There are additional penalties for not including certain information or for reporting information inaccurately.
The penalties will generally be 5% of the amount plus 1% per month until the amounts are corrected (to a maximum of 10% of the difference of what was reported versus what should have been reported.)
If the initial late penalty is not an incentive to do it right the first time, interest will be added at a rate equal to the basic rate plus 4% on any overdue amount.
And no…you cannot claim an income tax deduction for arrears interest paid or amounts payable for outstanding HST.
In high school you may have gotten an F for a late or incomplete assignment. In the business world, you risk being audited.
As a business owner, your time should be spent on what you do well.
For many of us, understanding the details of collecting and reporting on HST may not qualify as a task we understand fully. After all, the CRA General Information for GST/HST Registrants Guide is 85 pages long.
An easier solution? Leave it to your tax advisor to figure out.
You can download your own copy of the HST Guide at http://www.cra-arc.gc.ca/E/pub/gp/rc4022/README.html