Video Transcript – Calculating HST – Long Method or Short Method which one is best for you
Hi there, and welcome to the Campanella McDonald’s Tax Tip video. Today we’re going to talk about some ways to save some time and money when calculating HST returns. Are you paying too much in HST? And is it taking you too long to calculate your remittances? Well in Canada, in Ontario, there’s two different methods to calculate your HST. First is a long method, whereby you would take 13% of your sales and you would subtract any input tax credits. Now we’re going to eliminate, ignore the input tax credits, we’re just going to use sales. So if you have sales of $100,000, you would owe CRA $13,000 in HST. Now under the quick method, you take 8.8% of total moneys collected, which is sales plus the HST. So 8.8% of 113,000, this works out to about $9900 and then you get a $300 credit that you’re allowed to deduct. So the savings, you can see between using the quick method and the long method, are about $3500. Now there are some things to consider when deciding which method to use. First, you can’t just use the quick method. You have to elect with CRA to do so. Second, if your sales are above $400,000, you’re not allowed to use the quick method. Thirdly, any non-HST items such as payroll, form a really big factor in making your decision. If you have a large amount of expenses on your income statement that do not have HST on them, then the quick method really could save you some time and money. So my suggestion is for you to first talk to your accountant and see what their thoughts are. Lastly, call CRA and make the election to switch. So until next time, we’ll see you then. Bye now.
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