If you operate a business in Ontario, Canada, and are required to collect Harmonized Sales Tax (HST), it’s crucial to stay on top of your filing obligations.
In Ontario, approximately 1 in 5 businesses face penalties for failing to comply with HST filing deadlines. This statistic underscores the critical need for accurate and timely HST filings. Understanding HST regulations is essential for any business operating in Ontario, as late filings can result in hefty penalties. This article will outline HST filing requirements, key deadlines, common mistakes to avoid, and strategies for the smooth management of HST obligations.
Understanding Ontario HST Filing Requirements
HST Registration Thresholds
To comply with HST regulations in Ontario, businesses must register if their taxable revenue exceeds $30,000 in a single calendar quarter or over four consecutive quarters. For details, refer to the Canada Revenue Agency (CRA).
Filing Periods
Filing periods for HST vary based on your business revenue. Here's a summary:
Business Revenue | Filing Period |
Under $1.5 million | Annually |
$1.5 million - $6 million | Quarterly |
Over $6 million | Monthly |
Methods of Filing
You can file HST returns in several ways:
- Online: Fast and efficient; filing through CRA’s portal saves time and reduces errors.
- By Mail: Slower process; be mindful of potential delays.
Key Deadlines for HST Remittance in Ontario
Monthly Filers
For businesses that file monthly:
- Deadlines: HST returns are due on the last day of the month following the reporting period. Example: For the reporting period of January, the deadline is February 28 (or 29 in a leap year).
- Penalties: A late filing can lead to penalties of up to 10% of the owed tax plus interest. For example, a business owing $5,000 in HST could face penalties exceeding $500 if filed a month late.
Quarterly Filers
Quarterly deadlines are as follows:
- Due Dates: January 31, April 30, July 31, October 31.
- Planning: It’s vital to prepare in advance to meet these deadlines.
Quarter | Due Date |
Q1 (Jan - Mar) | April 30 |
Q2 (Apr-Jun) | July 31 |
Q3 (Jul - Sep) | October 31 |
Q4 (Oct-Dec) | January 31 |
Annual Filers
Annual filers must submit their returns by April 30 of the following year. Ensure all records are complete to avoid last-minute issues. Example: If your fiscal year ends on December 31, your HST return is due by March 31.
Common Mistakes When Filing HST in Ontario
1. Not Registering For GST/HST On Time
One of the biggest mistakes solopreneurs/business owners make is that they wait too long to register for GST/HST (and QST). They might assume that their sales do not exceed the threshold or they aren’t exactly sure how the calculation works. It can be easy to put it off until it's too late.
How to Avoid It:
If your taxable revenue exceeds $30,000 in any four consecutive calendar quarters, you're required to register for GST/HST. Even if you’re below that threshold, it still might make sense to register, as it allows you to claim input tax credits i.e. taxes paid on purchases.
2. Failing to Collect the Correct Amount of HST
Many businesses miscalculate HST. Common errors include:
- Failing to apply the correct rates.
- Omitting eligible input tax credits.
How to Avoid It:
- Verify the applicable HST rate for your region. In Ontario, the current rate is 13%. Ensure you use the correct GST/HST rate based on the province of your customer, rather than where your business is located. E.g. if you and your business are located in B.C. and you are charging an Ontario customer, the rate would be the Ontario rate of 13% HST rather than the 5% in B.C.
- Ensure that exemptions or zero-rated goods are correctly applied to your sales.
3. Missing or Incorrect Information
Common reporting mistakes include:
- Incorrect business numbers.
- Missing invoices or supporting documents.
- Errors in Input Tax Credit (ITC) Claims
How to Avoid it
- Double-check that you’re only claiming ITCs for eligible business expenses.
- Keep proper documentation, such as invoices and receipts, to support your claims.
4. Using the Wrong Reporting Period
Filing based on an incorrect reporting period can lead to discrepancies and audits.
How to Avoid it
Confirm your reporting period with the Canada Revenue Agency (CRA).
5. Not Keeping Adequate Records
Incomplete or disorganized records can complicate audits.
How to Avoid it
Maintain organized records of sales, purchases, and ITCs for at least six years. 6.
6. Overlooking Adjustments
If you issue refunds or credit notes to customers, ensure these adjustments are reflected in your HST return.
7. Ignoring Online Filing Options
The CRA’s online filing system is fast, and secure, and reduces the risk of manual errors. Consider using this platform for efficient submissions.
8. Missing Filing Deadlines
Filing your GST/HST returns late can result in penalties and interest which are completely unnecessary and can add up quickly especially given higher interest rates. You might miss deadlines due to a lack of organization or if you aren’t sure about how often you need to file.
How to Avoid it
Know your filing deadlines and reflect them on your calendar with reminders well before the due date to ensure timely submission (even if you are outsourcing your taxes to an accountant).
9. Not Charging GST/HST Even Though You Are Registered
It is a somewhat common misconception that, for those who are already registered for sales tax, if your sales are lower than the threshold of $30k in a year, you do not have to charge GST/HST. This can lead to audits from CRA when you file your returns.
How to Avoid It:
If you are registered for sales tax, even if your business is largely inactive or you only have a few dollars of sales, you still have to charge GST/HST. The only way to stop charging sales taxes is to de-register your GST/HST.
Tips for Staying Compliant
- Automate Where Possible: Use accounting software that tracks HST collections, ITCs, and deadlines.
- Consult a Professional Accountant: If you’re unsure about your obligations or have complex transactions, seek advice from a tax professional in Ontario.
- Stay Informed: Tax rules and rates can change. Regularly check the CRA’s website for updates.
Consequences of Non-Compliance
Failing to file or pay your HST on time can lead to:
- Penalties: Typically 1% of the balance owing plus 25% of that amount for each full month the return is late, up to a maximum of 12 months.
- Interest Charges: Accrued daily on any outstanding amounts.
- Audits: Persistent non-compliance increases the likelihood of an audit by the CRA.
What to Do If You Miss a Deadline
Understanding Penalties
Late filing incurs penalties and interest. For example, a $2,000 HST owed could attract penalties ranging from $100 to $200. Regularly monitor your obligations to avoid such situations.
Requesting an Extension
Businesses may request filing extensions under specific circumstances. Follow these steps:
- Contact the CRA before the deadline.
- Provide the necessary documentation to support your request.
For more information, check the CRA extension guidelines.
Addressing Errors
If you discover an error after filing, submit an adjustment request. This can correct mistakes in previously filed HST returns.
Final Thoughts
If you have made any of these mistakes, know that you are not alone. HST filing might seem daunting, but staying organized and proactive can help you meet your obligations smoothly. By understanding the deadlines, avoiding common mistakes, and seeking professional advice when necessary, you can keep your business compliant and avoid unnecessary costs.
If you are encountering any challenges in filing your GST/HST Return feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.