This time of year, many businesses are faced with big questions. Questions like, “What are our plans for the new year?” Perhaps you’re asking yourself, “Should I file my own taxes or get help?” No matter what questions are puzzling your mind, we’re here to offer a few answers. So, if you find yourself wondering what GST/HST input tax credits (ITCs) are and how they relate to you and your business, then you’re in the right place.
What Are Input Tax Credits?
Input Tax Credits are essentially exactly what they sound like. They are the vehicle through which you recover any GST or HST that you paid on purchases and expenses related to your business. You will see Input Tax Credits referred to as ITCs right in the Canada Revenue Agency documents you fill out for your taxes.
How Do You Submit ITCs?
To use Input Tax Credits, you have to be registered with a unique GST number assigned to your business. Then, keep a record of any GST or HST paid on qualifying business-related purchases or expenses. Make sure you don’t merely destroy this record after you file your taxes. It is essential to keep your financial records for a few years. Many businesses ultimately get denied on some of their claims if the CRA audits them simply due to a lack of documentation. If you aren’t sure, keep it or ask an accountant.
Not all expenses qualify for ITCs. There’s a comprehensive list that you can find on the CRA’s website. But some of the more popular items that businesses claim their GST/HST on are rent advertising expenses, accounting, office supplies, travel, vehicle expenses or even home office costs.
You’re going to have to prove that the vendor the expense comes from is a qualifying vendor. This means you need to be able to show the vendor’s GST number, and it must be valid. Other vital information to keep a record of is the vendor (or business’) name, the date and total of the purchase, the taxes on the purchase itself and if they are included or not and any terms of payment. An invoice or itemized receipt is a great document to have in this case. You’ll easily find the description of the service or item purchased on it.
Why Should You Care?
As a business owner, you know there are lots of moving parts in running a business — expensive moving parts. By claiming the GST/HST you’re paying on qualifying expenses, the more money goes back in your business’ pocket.
Filing your taxes as a business can be tricky. There are lots of transactions involved, and to save as much as possible, you should claim as much as possible. ITCs are just one of many useful ways to save yourself and your business money. If you’re feeling overwhelmed and want to make sure you submit everything your business can claim, consider hiring an accountant to help. At Genesa, we’re passionate and dedicated to helping companies to navigate the waters of Canadian Tax Season, give us a call today and let us help.