Using the GST/HST Quick Method in Your Accounting

As a small business owner, you’re already juggling a million tasks – why add complicated tax calculations to the mix? 

What if I told you there’s a shortcut? 

Say hello to the GST/HST Quick Method!

This simplified accounting method allows you to calculate your GST/HST using a fixed rate, so you don’t have to track every single GST/HST input tax credit (ITC) and expense.

The GST/HST Quick Method can save you time, reduce paperwork, and even potentially put a little extra cash back in your pocket (and who doesn’t want that?).

In this post, I’ll guide you through the ins and outs of the Quick Method, showing you how it can simplify your tax filing and make your life a whole lot easier.

What is the Quick Method of Accounting for GST/HST?

Normally, filing your GST/HST can be a bit of a chore. You have to keep track of every single amount of tax you collect on your sales and every GST/HST amount you pay on your business expenses. 

But with the Quick Method, you remit GST/HST to the CRA at a fixed rate (based on your industry and province) rather than remitting the full amount and then subtracting your input tax credits. This rate makes it super easy to figure out exactly how much GST/HST you owe.

The Quick Method isn’t for everyone and you do need to keep in mind that when you file this way, you’ll have to include any money you “made” on your tax return as a result of using this method. Because if you bill an amount to your client for GST/HST and don’t pay that full amount back to the CRA, it’s like you are making additional income and it’s classified as taxable income.

You’ll need to keep this in mind when calculating if you should switch to the Quick Method or not. 

GST/HST Quick Method Example

Let’s say you’re a freelance graphic designer in Ontario. Normally, you’d charge your clients 13% HST on your services. Then, you’d subtract the HST you paid on business expenses from the HST you collected to determine how much you owe to the CRA. This means lots of tracking and paperwork.

But with the Quick Method, things get simpler. You still charge 13% HST, but instead of remitting all of it to the CRA (and then deducting any GST/HST you paid on your expenses from that payment),you remit a portion based on a predetermined rate.

Here’s a breakdown:

• You made $10,000 in sales, so you collected $1,300 in HST.
• With the Quick Method, the remittance rate for service providers in Ontario is 8.8%.
• Instead of sending the full $1,300 to the CRA, you calculate 8.8% of your total sales, which is $880.

Boom! You’ve just made your tax life easier, cut down on paperwork, and potentially keep more cash in your pocket. 

You can find your remittance rate on the CRA website. If you are in Québec, you can find your remittance rate on Revenu Québec website.

Am I eligible to use the Quick Method to Calculate HST?

Okay, I know I’ve got you all excited about the Quick Method. And I hate to be the bearer of bad news, but… not every business qualifies. 

The CRA has set some criteria to determine who can use this method. Here’s what you need to know:

• Annual Taxable Sales: Your annual taxable sales, including GST/HST, need to be $400,000 or less in any four consecutive quarters. 

• Previous Use: You shouldn’t have revoked your election to use the Quick Method in the past year. If you’ve already tried it and decided it wasn’t for you, you’ll need to wait a bit before you can switch back.

• Types of Businesses: The Quick Method is perfect for service-based businesses with less expenses (because you have less GST/HST Input Tax Credits – read the section below to learn more about these!). So if you’re a consultant, designer, or provide similar services, this method is likely a good fit. However, it can also work for some retailers and other types of businesses – just check the CRA’s specifics.

• Sales Limits: Remember that the $400,000 limit includes all your taxable supplies (goods and services you sell), so make sure you’re adding everything up correctly.

Quick Tip: If you’re still unsure, the CRA has detailed guidelines to help you figure out if you’re eligible or not.

And remember, if you don’t qualify, it’s not the end of the world. There are other methods available that might be a better fit for your business needs.

The Lowdown on GST/HST Input Tax Credits 

Alright, let’s talk about something that sounds a lot more complicated than it actually is: GST/HST credits, or as they’re officially called, Input Tax Credits (ITCs). 

The big benefit of the GST/HST Quick Method is that you don’t have to track every penny of HST you collect or every ITC you claim. This makes tax time way more manageable for us small business heroes. But it does mean you can’t always claim back ITCs.

If you’re using the quick method, you can still claim ITC on big buys such as:

• Real property purchases and improvements
• Capital property purchases and improvements – ITCs apply to purchases of capital property (excluding real property), like computers and vehicles, and any upgrades you make.
• Purchases made before your Quick Method election – If you paid GST/HST before switching to the Quick Method and the time limit hasn’t expired, you can still claim those ITCs.
• Goods sold by auctioneers or agents – If someone sells your goods and handles the tax, you can claim ITCs for those.

Remember, the Quick Method might not be the best fit if you have hefty GST/HST expenses because you can’t claim ITCs for most day-to-day purchases.

Before jumping in, check the eligibility criteria, potential savings, and how it’ll impact your cash flow.

Make GST/HST Work for You

Switching to the HST Quick Method can simplify your accounting and give you more time to crush it in your business. If you’re a service provider, chances are it will save you money, but every business is different and you need to assess if it’s going to boost your cash flow or cost you. 

Inside my free HST guide, what in the HST?! I have a completely FREE tracker that will help you to calculate how much you would pay in taxes if you did not use the Quick Method. It’s always worth comparing which is the most tax efficient way to file in your business

And remember, this isn’t a free pass to slack on your taxes. Stay on top of them to avoid the mad rush when the GST/HST filing deadline hits.

In need of more tips and advice? Don’t forget to check out my free guide, What the HST Am I Doing?. It’s packed with helpful resources that can make tax time a breeze.