Mark Feldstein & Associates

Perhaps you haven’t gotten around to filing those annual GST/HST returns.  You might not want to delay any longer.

Christopher Hewgill of Barrie, Ontario postponed filing corporate GST/HST returns for the 1993 to 1999 taxation years and as a result was fined $7,000 in the Ontario Court of Justice in Barrie in July, 2010.  In addition to the fine, the taxes and interest owed, Mr. Hewgill was required to file the delinquent returns and pay the penalties imposed by the Canada Revenue Agency (CRA).

Want to avoid CRA penalties and charges?  If eligible, you can file outstanding tax returns and/or report previously undisclosed income under the Voluntary Disclosure Program.  If you have not been contacted by the CRA, if they have not initiated an action or investigation against you, then you are eligible for the Program.  Rather than paying penalties and court fines, you may only have to pay the taxes and interest owing.

Mark Feldstein Corporate Taxes, Tax Convictions Barrie, failure to file, GST, HST

Although we have transitioned from a 5% Goods & Services Tax (GST) to a 13% Harmonized Sales Tax (HST), the process of instalment payments has not changed. However, the consequences of not paying correct instalments or paying instalments late have substantially increased.

While the threshold to begin owing instalments for GST/HST remains at $3,000, many GST/HST registrants who were not paying instalments in the past may find themselves at the $3,000 threshold with HST and need to begin making instalment payments.

In order to avoid interest charges on GST/HST instalments, one must pay instalments at least in the amount of the prior year GST/HST owing. For example, if you (your company) owed $4,000 in GST last year, and you pay $1,000 in instalments for each quarter this year, then you will not be charged interest for under-paying your instalments. Instalment payments are due within one month after each quarter.

However, by only paying instalments equal to your prior year GST owing, then at the year-end you will owe a lump-sum payment of HST that will represent the additional 8% (from 5% to 13%) of HST you have collected during the year. Therefore the $4,000 in GST you may have paid in a prior year, may balloon to $10,400 of HST in the current year.

Companies who do not plan ahead to leave enough cash on hand to pay the HST collectible to the CRA at this time will find themselves in a difficult situation. It is extremely important to ensure you can make this payment as CRA will begin to charge you interest compounded daily for the outstanding amount. Interest will be charged on overdue balances and/or late or insufficient payment.

Companies may want to set up a separate savings account to collect the GST/HST collectible in order to ensure that the cash is available at year-end. Alternatively, you may choose to increase your instalments throughout the year (current instalment x 2.6 to account for the 8% tax increase) in order to prevent a single large payment from paying only the minimal required instalments.

Mark Feldstein Corporate Taxes, HST Goods & Services Tax, GST, Harmonized Sales Tax, HST

Mark Feldstein discusses possible ways that the new Harmonized Sales Tax (HST) will impact the way that the Canada Revenue Agency (CRA) pursue unpaid taxes.

Mark Feldstein Corporate Taxes, Personal Taxes, Video HST