The quick method is another accounting option available to help small businesses calculate their net tax for GST/HST purposes. This method reduces paperwork and makes it easier to calculate GST/HST remittances and file GST/HST returns because it eliminates the need to report the actual GST/HST paid or payable on most purchases.
That’s right. There is another option where you can file your GST/HST remittances that saves you a lot of time on paperwork. Also, if you are operating a business where you do not claim much input tax credits (ITC), you save on the overall GST/HST balance using the Quick Method.
The Quick Method also enable business owner to take advantage of a 1% credit on the first $30,000 of HST included income. According to the CRA:
In calculating your net tax using the quick method, you are entitled to a 1% credit on the first $30,000 of your eligible supplies (including the GST/HST) on which you must collect the GST at 5% or the HST at the applicable rate in each fiscal year.
To illustrate, Julian is a freelance web designer in Ontario, who has elected to use the Quick Method for the calendar year. Here is what we know about Julian’s business:
– Taxable income before HST = $60,000
– Taxable expenses before HST = $1,5000
– Remittance Rate = 8.8%
– Taxable Sales with HST = $60,000 x 1.13 = $67,800
– HST owing on the first $30,000 of HST included income = ($30,000 x (8.8% – 1.0%)) = $2,340
– HST owing on remaining balance = (($67,800 – $30,000) x 8.8%) = $3,326.40
– Total HST to be remitted to CRA = $2,340 + $3,326.40 = $5,666.40
If Julian did not elect the Quick Method, his HST remittance would be as follow:
– HST charged on sales = $60,000 x 13% = $7,800
– HST paid on expenses = $1,5000 x 13% = $195
– Total HST to be remitted to CRA = $7,800 – $195 = $7,605
– Difference using Quick Method = $7,605 – $5,666.40 = $1,938.60
As you compare both scenarios, Julian saved himself $1,938.60 by electing the Quick Method. The Quick Method also allows you to claim the input tax credits (ITCs) that are attributed to capital assets acquisitions.
You can elect the Quick Method by completing Form GST74, Election and Revocation of an Election to Use the Quick Method of Accounting.
There are a few exceptions who can elect the Quick Method. The Quick Method is catered to small businesses with GST/HST includes sales of less than $400,000. It is also prohibited by certain professions such as accountants, bookkeepers, lawyers and charities to elect the Quick Method.
Need assistance to see if the Quick Method is right for you? Contact us today at (613) 413-8272 or firstname.lastname@example.org.