Hey everyone, I’m in a bit of a bind, and I can’t call the CRA for answers because they are on strike, so am hoping someone here can help.
My situation is as follows: I am filing taxes for the first time for the new online marketing business I started last year. In case it’s important to note, the business and tax return are officially in my name and tied to my SIN rather than a business name and number. The two clients I have are both based in Europe and pay me in euros. As the services I provide should all be zero-rated, I have not charged any of them GST nor have I registered for a GST number.
As a result, my accountant, who uses ProFile, doesn’t know how to report that my income is zero-rated, and ProFile automatically flags the field where the GST should be. I don’t want to file my taxes in their current state lest the CRA sees it as a red flag that I earned a substantial income yet did not charge any GST.
After doing some research into this, I learned (and communicated to my accountant) that I need to fill out a GST return form. However, can I do this without having a GST number? Do I need to register for a GST number even though all of my income is zero-rated?
How can I make things clear (using ProFile or any other methods) to the government? What options do I have here?
Any advice on this will be greatly appreciated, as I’ve spent hours the past few days trying to figure this out.
Thanks, Jeremy. I don’t think it’s that she didn’t know the threshold applies; it’s that my previous business was only within Canada and under $30K, so she was caught off guard when I came in to do my taxes this year since it was considerably higher.
As for your comment “It’s likely just a caution,” what do you mean by that?
I’m surprised she didn’t mention to you about the requirements of opening a GST account considering you’re a self-employed. Even if you didn’t earn more than 30k, she should’ve provided you advice on when to open an HST account.
Your “accountant” should draft a letter directed to the CRA GST/HST department. The letter should mention that you would like to open a GST/HST account from the date you’ve earned more than $30k in gross revenue. She would also need include form RC1 with the letter. The CRA can open a GST account 6 months before, anything more would require a letter to them. Since self-employed individual tax deadline is June 15th, I’d suggest you ask your “accountant” to provide you with an estimated amount that you’d be owing, that way you pay the owing balance before April 30.
Tax software has various levels of diagnostics. Some are critical and even prevent you from filing a return. Others are simply cautions (i.e. reminders to check with the client or to double-check something). The ProFile diagnostic about GST not being reported on the T2125 when the sales were greater than $30,000 sounds like a caution diagnostic and not something critical.
Thanks for the input. However, I won’t be owing any GST since everything I earned is zero-rated. Does it matter in this case that it’s been longer than 6 months or can I just open the GST account whenever myself soon?
Caution: If you are going to claim ITC (Input Tax Credits), the GST/HST has to be extracted from your cost of goods and expenses as they will refunded to you.
Note: If memory serves, a client had several material items in expenses with GST included. As a GST/HST registrant the auditor allowed the net claim, but denied the GST/HST which was never claimed. Can’t recall if the deadline to amend the ITC claim was history.
Given the above, extracting the sales tax, claiming the ITCs, and deducting cost of goods and expenses net of sales tax would be the way to go.
I have a client who is all zero rated. I entered the zero rated supplies on line 90 on the GST return. Zero rated exports go on line 91.
I agree with the advice above about backdating your registration. If you’re going to claim ITCs, just know that every GST refund triggers a desk audit. So be prepared with your general ledger, financial statements and receipts.
I file for a client that NEVER collects GST as all services are exported and the ITC claims are significant, so all returns are refunds. In just over 20 years I’ve been asked ONCE to provide details. I sent the contracts, which are ongoing and a listing of ITCs for the periods in questions. That was the last I heard from CRA.