This article first appeared on the CA4IT Blog on January 4th, 2014
Once you start earning more than $30,000 in revenues, you are required to register for a GST/HST number and charge GST/HST to your clients. This can be done as part of your application for a Business Number (BN). Registration can be done online using the CRA’s Online Business Registration.
Why should I register for GST/HST?
If you are rendering services in Canada, you should charge GST/HST to your clients, even if your contracting agency is located in the United States. Registering for GST/HST allows you to recover all the GST/HST amounts you may have spent during your first few months of business operations which could translate into extra dollars in your pocket.
Charging GST/HST on your invoices also looks professional and shows your clients and customers that you run a serious business. If you act like a business, you’ll be treated like one.
How often should I file my GST/HST?
You should elect to file your GST/HST return annually and ask that your year-end for GST/HST purposes coincide with your company’s fiscal year-end.
You will be given an option to choose the method you use to calculate the GST/HST you need to remit. You can opt for the “Long Method” or “Quick Method”, but if no option is selected you will automatically be registered for the “Long Method”. More on Long vs. Quick Method will be discussed in a later post.
Do I need my GST/HST number before I can go ahead and invoice my client?
No; you can simply write ‘Pending GST/HST Number’ on the invoice and advise your client that you will provide them with the number after you have received it from Canada Revenue Agency. You should of course plan ahead and obtain your Business Number on a timely basis.
How do I know when I’m supposed to report my GST/HST?
When you register for GST/HST, Canada Revenue Agency will assign you a reporting period, which is based on your annual total sales. If your annual taxable sales in Canada are $500,000 or less, you will have an annual reporting period.
How do I know whether or not I am supposed to be making installment payments on my GST/HST?
If you file annually, and your current GST/HST outstanding is less than $1,500, you do not have to remit GST/HST instalments. You should however file your GST/HST return and send in the net tax you owe within three months of your fiscal year end.
On the other hand, if your net GST/HST tax exceeds $1,500, you are required to remit quarterly GST/HST instalments. After you have filed your first annual return, Canada Revenue Agency will tell you if you need to start paying the GST/HST in instalments as well as the amount of each payment. Instalments are due no later than one month after the last day of each fiscal quarter. When you file your annual GST/HST return, the balance of GST/HST owing must be made to the CRA. Payments can be made at any financial institution.
CA4IT/Wall & Associates P.C. has 30 years’ of experience dealing with and supporting independent IT professionals. Over this period of time, they have developed a suite of resources and financial services based on hands-on experience with over 10,000 clients. CA4IT provides consulting advice on financial and tax planning strategies designed to maximize after-tax income and to minimize personal and corporate taxes for incorporated consultants and sole proprietors, project managers and service based small businesses. CA4IT concentrates on maximizing the financial rewards of being an independent contractor. They have been an active member of NACCB (National Association of Computer Consulting Businesses) since its inception and a primary goal is to work with professional firms like Eagle to add value to the Knowledge Worker industry.