Filing taxes is mandatory; otherwise, you can wait for CRA (Canada Revenue Agency) to penalize you for not filing. However, filing taxes on time not only helps you avoid penalties but also aids in improving your business image. Filing your taxes on time and correctly to the CRA will earn you a positive reputation as a tax filer. Plus, there are deductions you can benefit from when it comes to filing an HST return. Also, you may not have an awareness of some eligible items for deductions when filing your HST return. In this post, we shall mention those items with you to help you get more deductions.
Our Tips Concerning Tax Items You Might Ignore When Filing HST Returns?
Here are our tips:
- Parking Receipts/Not Tickets: You can claim back HST you incur on expenses as per law. Such a claim is an ITC (Input Tax Credit). Vehicle parking is vital for meetings, meals, or conferences. Moreover, GST/HST (Component of sales tax) has an involvement, related to vehicle parking. Many receipts do not mention that, although they have a breakdown of subtotal and sales tax. You should start treating parking receipts inclusive of GST/HST to benefit from this ITC.
- Taxi Fares: Taxis and Uber do a better job than the parking facilities to show the breakdown of the overall fee. However, you must know how to calculate your HST for your taxi fares. To compute HST (Harmonized Sales Tax), you can multiply the whole fare by 13 and divide your result by 113. Calculating GST requires you to multiply your total by five and divide your result by 105.
- Mileage Reimbursements: If the employees of your business travel using a vehicle and get reasonable reimbursements, you can claim attributed ITC. The calculation for mileage reimbursements is the same as taxi fares. If you are not an expert at calculating the right numbers to claim ITCs, hiring an accountant will definitely help.
- Re-Billable Expenses: Different rules apply to get ITCs from re-billable expenses. If you do not understand the rules associated with such expenses, consult a tax expert. For instance, you may incur a hotel expense of $100 with 5% GST that makes it $105. Thus, you will re-bill your client $105, $100 as your income, and $5 as GST. Hence, you can claim your $5 for the received GST. Everything nets to zero when you re-billed the client and collected $5 in GST. Does it make sense?
- Day-to-Day Expenses, Not GST/HST Taxable: You should record your interest charges, bank/credit card transaction fees, insurance fees without sales tax. It will aid you to get a benefit lawfully when filing an HST return.
- Sales Tax from Canadian to Non-Canadian Entities: Can you charge GST or HST to a client in the U.S. (United States)? However, there are exceptions regarding this if your U.S. clients have registration for Canadian sales tax. You can claim your related expenses to the CRA with all backup documentation. CRA needs supporting documentation for refunds to ensure your claims are accurate concerning ITCs.
- Social Event Expenses: Meals and entertainment expenses are 50 percent deductible. A lesser-known deduction has a relation with company social events. For instance, if your company provides a party or social event to employees from a specific location, the complete event cost becomes deductible.
- Import Duties: Companies importing tangible goods outside Canada for mercantile use have to pay sales tax. However, the sales tax they pay to receive those goods is an ITC. The sales tax amount is noteworthy for goods they import. Plus, many companies utilize a customs broker service to coordinate shipment receipts. Still, some companies cost them while coding amounts for imported goods as an expense.
- Previously Unclaimed ITCs on Current Sales Tax Filings: Most companies have four years to claim their ITC if they forget to include them in sales tax filing. This limit is two years for larger businesses, earning $6 million in revenue. The same holds for certain financial institutions. Hiring a reliable CPA (Chartered Professional Accountant) has helped businesses that failed to claim their ITCs. It also helped them with a rise in their cash flow.
When filing an HST return, do not forget the following to claim your ITCs:
- Vehicle parking receipts can help you claim your ITC from the CRA.
- Taxi fares are eligible for claiming ITCs.
- Mileage reimbursements qualify for ITCs.
- Plus, re-billable expenses qualify for ITCs.
- You can claim your ITC for day-to-day expenses, not GST/HST taxable.
- Also, you can claim sales tax from Candian to Non-Canadian (U.S.) entities with supporting documentation.
- You may claim an ITC for social event expenses.
- You can claim your ITC for sales tax on imported goods.
- Additionally, you can claim previous unclaimed ITCs on sales tax filings.
In a nutshell, hiring a CPA can help you better know your ITCs when filing your HST return.