Hi, I am filing my commission earnings for first time. I would love a clarification. Why only quick method calculation is included in T2125 and not the normal method? does this mean that you pay income tax on GST collected minus GST to be remitted? but only if you use quick method?
No income tax on norma method? I know that= you file separate GSt return
When you file your GST/HST returns using the “Quick Method” you get to keep a portion of the tax that you have collected. The percentage you keep is different depending on whether your business supplies goods or provides services, and is supposed to loosely mimic the amount of GST/HST you have paid on your inputs. With the quick method you are not required to keep a detailed track of the GST/HST that you have paid out, and (except for limited items) you are not entitled to claim back any of the GST/HST that you actually incur on your business expenses.
Since you are keeping a portion of the GST/HST that you collect this differential is considered to be income. When using the quick method, this differential is added to your revenue on the T2125 statement.
Businesses not using the quick method are required to keep track of the GST/HST they have paid on expenses and deduct the tax (called Input Tax Credits) from the tax they have collected. This too is considered to be income, however, normally these Input Tax Credits are accounted for as a reduction in the specific expense to which the GST/HST relates.
So basically under the quick method the difference between what you collect and what you remit in GST/HST becomes revenue (since it doesn’t relate to specific expenses) and under the regular method the difference between what you collect and what you remit in GST/HST is deducted from your expenses. The net result is the same.