One way to maximize your tax saving is by making the right decision on how you elect to account for the HST. The two options offered by the Canada Revenue Agency (CRA) are simply called the quick method and the regular method. Someone may easily believe that both methods would result to the same tax amount and one method would be faster to calculate, however the reality is that difference is more than just about the speed to make the calculations!
Depending on your situation, one method will result to more tax saving than the other. For example an IT consultant with a revenue of $100,000 and Input tax credits (ITC) expenses of $5,000, that business would pay $12,350 in HST tax using the regular method versus $9,644 using the quick method. This is a $2,706 in tax savings by only choosing a better method to your bottom line.
Long method HST calculation
Revenue $100,000 x 13% = $13,000
Expense $5000 x 13% = $650
HST tax to remit = $12,350
Quick method HST calculation
Revenue $113,000 x 8.8% = $9,944
Business Supply rebate $30,000 x 1% = $300
HST tax to remit = $9,644
The following is the CRA link regarding HST calculation.
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Calculate the net tax to complete a GST/HST return
GST/HST – General information on how to calculate the net tax using the regular method and an interactive GST/HST calculator for the quick method of accounting.