Once you’ve got your new business up and running, there are on-going maintenance, compliance and reporting requirements that you must be aware of. In the previous posts in this six-part series, we have identified the different types of business structure and the advantages and disadvantages of each. We’ve provided some high level detail on how to set up each of the different types of structures and the different professionals you should consider including on your small business management team. In this post, we are going to provide an overview of the on-going reporting and compliance required by the CRA.
HST Reporting & Compliance
HST is a trust account, meaning that if you collect HST on the products and services that your small business sells then you have to remit it to the government. But because you also likely pay HST on the products and services that you purchase within your business, you don’t have to remit every penny of HST that you collect, only the difference between the amount you collect and the amount that you pay. This can go both ways – if you collect more HST than you pay then you have pay the difference to the government but if you pay more than you collect then the government will pay you the difference.
You can remit HST on a monthly, quarterly or annual basis depending on some revenue thresholds for your business. Generally, for most small businesses whose revenue is less than $1,500,000 per year you are only required to remit HST annually, although you can choose to do so more frequently if you wish. When you set up your HST account you indicate how often you want to file your HST but if you don’t select an option then you will be defaulted to annually. If you change how often you submit your HST then you can do so by completing a GST/HST election and you must do this before February 28 for it to take effect in that fiscal year.
We recommend that small business owners file their HST returns quarterly. This avoids the situation of a huge tax bill at the end of the year. If a business owner wishes to keep remitting annually then we recommend setting up a separate bank account for the HST that you collect and will have to pay just so you don’t look at your operating bank account and think you’ve got more money in your business than you actually have.
For unincorporated sole proprietorships or partnerships, the government has mandated that your fiscal year end is December 31. Historically you could choose a different year end but the CRA changed the rules and mandated a December 31 year end for all unincorporated businesses to make things easier.
For incorporated businesses like corporations and co-operatives you have to trigger a year-end by the end of the previous month of your date of incorporation in the following calendar year? A bit confusing? Ok, let’s say you incorporate on August 25, 2014 (the date of this post). The CRA requires that you have to trigger a year end by the end of the previous month (July 31) in the following calendar year (2015). So if you incorporated today, you would have to trigger your year end by July 31, 2015.
You can choose to trigger your year-end before then – maybe to align with the year-end of another business to do everything all at once or maybe you want it to align with your personal tax year (which ends December 31). This is called do a “little year-end” and you can do this as often as you want as long as it’s no longer than a year between successive year-ends.
Keep in mind that while you have 180 days following your actual year-end to file your business tax returns with the government, interest on any monies owed to the government will start accruing after 90 days.
Payroll Compliance and Reporting
If you have employees that you pay through payroll then you are required to collect and remit source deductions.
Typically, source deductions include personal income tax for your employees, Canada Pension Plan (CPP) deductions and Employment Insurance (EI) deductions. When you run payroll you have to determine the appropriate amount of these (and possibly other) deductions and take them out of your employee’s gross pay.
As with HST, source deductions are a trust account so you have to remit them to the government. Source deductions are due by the 15th (or next business day to account for weekends and statutory holidays) of the following month. Going back to our example, source deductions collected during the month of August would be due by September 15.
If you own more than 50% of the shares of an incorporated business then you do not pay EI deductions. The flip side of that coin is that you cannot collect EI if your business does not succeed – such is the risk of being a business owner.
Once you’ve successfully started your new business, there are on-going obligations to CRA for compliance and reporting. You have to remit the HST that you collect at least annually, you have to trigger a fiscal year-end at least annually, and you have to remit source deductions from any payroll employees on a monthly basis. Keeping up with the compliance and reporting while dealing with all the other things that will get thrown at you when you start your new business can be a little overwhelming, but a professional bookkeeper can help manage this and other financial parts of your business.
Simply Bookkeeping1 provides professional bookkeeping services for freelancers, solopreneurs and owners of unincorporated and incorporated businesses. We customize our services based on your needs – we only see some of our clients a few hours a month but others we see on a more regular basis. Our services are reasonably priced and we tightly track the amount of time we spend working for you so you only pay for the services you get.
To learn more about us, please visit our website at www.simplybookkeeping1.com or contact Michele Hyde by phone at (647) 668 – 9363 or by email at firstname.lastname@example.org.
Have Your Say
If you’ve recently started a new business and are dealing with the CRA compliance and reporting requirements, we’d love to hear from you. Tell us what’s on your mind and share your thoughts! Also, please share this article using the social media share buttons – chances are there are others out there dealing with the same issues!