Webinar: What to expect during a GST/HST trust account examination - YouTube

Hello and welcome to our webinar on what to expect during an examination of your goods

and services tax/harmonized sales tax—or GST/HST—trust accounts. My name is Mathew

and I am your presenter. Today’s webinar will be recorded and posted on Canada.ca later

so you can refer to it in the future. This webinar will be of interest to you if you

have a business and collect GST/HST. Managing your GST/HST obligations can be complicated.

And being notified that your business will get a GST/HST trust accounts examination can

cause you some stress. Being prepared for such an examination can go a long way toward

easing your concerns. It can also help the examination go smoothly and quickly. That

way you can get back your focus on running your business as soon as possible. A GST/HST

trust accounts examination is simply a review of your books and records to make sure you’ve

done the proper calculations related to your GST/HST obligations and that you applied the

laws correctly. This helps keep the tax system fair for everyone. A trust accounts examination

is not an audit. An audit is a more detailed examination of all your books and records.

However, if our examination raises some concerns, your business can then be referred for an

audit. In our experience, most businesses want to do things right. Intentional non-compliance

is rare. Sometimes it’s just a matter of getting a little help and know-how to get

back on track. If you operate a business and your sales are $30,000 or more during any

calendar quarter or your sales were $30,000 or more in the last four consecutive calendar

quarters, you have to register for a GST/HST account and collect GST/HST on the products

or services you sell. If you have employees, the Canada Revenue Agency (or the CRA, for

short) can also conduct a payroll trust examination to make sure you have collected and remitted

Canada Pension Plan, employment insurance and income tax on behalf of your employees.

You also have to file T4 slips. The CRA might do a payroll trust examination at the same

time as a GST/HST examination. We will not get into payroll examinations in this webinar,

but you can find more information in our payroll trust examinations video at Canada.ca/cra-videos.

This webinar will explain the GST/HST trust accounts examination process. We will cover

the following topics: What are your GST/HST obligations? What is a GST/HST trust accounts

examination? And how do you prepare for the examination? What happens during and after

the examination? In most cases, if you are a sole proprietor, partnership or corporation

that provides taxable supplies in Canada, you must register for a GST/HST account. That

means you have to collect the GST/HST on what you sell, you hold the money you collected

from your clients “in trust,” and then you send it to the CRA. All GST/HST registrants

also have to file GST/HST returns. The exception to this is the small supplier. You are a small

supplier if the total value of what you sell is less than $30,000 during any calendar quarter

and in the last four consecutive calendar quarters. If you are a public service, you’re

a small supplier if the value of what you sell is less than $50,000 during any calendar

quarter. For GST/HST purposes, a public service is either a non-profit organization, a charity,

a municipality, a school authority, a hospital authority, a public college or a university.

Small suppliers do not need a GST/HST account. As a GST/HST registrant, you may also claim

a tax credit, which brings us to the discussion about net tax. We’ve established that you

collect GST/HST from your clients. At the same time, you likely also pay GST/HST for

the purchases you make for your business. As a GST/HST registrant, you can recover some

of that GST/HST by claiming an input tax credit, which we call an ITC for short. You might

be able to claim ITCs if your purchases and expenses are for things you consume, use,

or supply in your commercial activities. For example, a long haul trucking business may

choose to claim an ITC for the GST/HST they reimburse to their drivers for meal and entertainment

expenses they incurred in Canada. For more information on what ITCs your business could

be eligible for, take a look at form RC4022 found on Canada.ca/cra-forms-publications.

The difference between the GST/HST you collect and the ITCs you claim is the net tax. You

have to calculate your net tax for each GST/HST reporting period and report this on the GST/HST

return. For instructions on how to calculate your net tax, go to Canada.ca/cra under the

Taxes tab and then click on GST/HST. Once you have calculated your business’s net

tax, there are two ways you can file your GST/HST returns. First, you can file monthly

or quarterly. If you have a monthly or quarterly reporting period, you have to file your GST/HST

return and remit any amount owing one month after the end of your reporting period. Second,

you can file once per year. If you report annually, you usually have to file your return

and send the CRA any amount owing three months after the end of your fiscal year. You may

also have to pay quarterly instalments. In that case, each instalment payment is due

one month after the last day of the fiscal quarter. It’s important that you file your

GST/HST returns on time. If you own or operate a sole proprietorship or partnership and have

not filed, the CRA will hold your personal income tax refund. The hold will be lifted

when you file your GST/HST return. If you are a mandatory electronic filer, you should

file through GST/HST NETFILE. To find out if you are a mandatory electronic filer, consult

Guide RC4022. As I mentioned earlier, a GST/HST trust accounts examination is a review of

your books and records to make sure you properly calculated the GST/HST you collected, your

input tax credits, and the net tax. We also make sure you file overdue GST/HST returns.

Remember that the trust accounts officers are there to help. You can ask them any questions

you may have about your GST/HST and employer payroll obligations. You should ensure that

you have overdue GST/HST returns prepared and ready for review. Maintaining documents

in an orderly fashion and staying organized helps the trust accounts officers complete

the examination quickly. It is important to make sure your books and records are accurate

and up to date. They should include invoices, receipts, source documents, bank statements,

and etc. They also should be easily accessible, either electronically or on paper. If you

need some help, the CRA’s free Liaison Officer Service helps small businesses get their tax

obligations organized. Liaison officers are available across Canada to help you understand

your tax obligations and avoid common errors that could cost you time and money. Find out

more at Canada.ca/cra-liaison-officer. So, let’s say you’ve been selected for a GST/HST

trust accounts examination. There are many reasons you might be selected for a Trust

Account Exam. Some of these include non-compliance, referrals from other CRA sections, and certain

situations that cannot be resolved with a simple phone call. First, an examination officer

will call or send you a letter to set up an appointment with you or your authorized representative.

At that time, they will explain what books and records they will need for the examination.

For example, you’ll be asked to produce completed and signed GST/HST returns for any

overdue periods. Examination officers who call your business may ask for your business

account number and other information to verify your identity. An Examination officer will

never ask you for immediate payments by e-transfer, PayPal, interact or others, and will never

use aggressive language. To learn about how to protect yourself from scams, visit Canada.ca/tax-tips

and click on “What to expect when the Canada Revenue Agency contacts you”. The examination

officers are there to help you. Feel free to ask them any questions you may have. During

the examination, the officer will review your books and records. They may ask questions

about how you charged, remitted and reported the GST/HST. Please be as open and honest

as possible. Be prepared to explain any actions you took. If you cannot provide your GST/HST

return, the officer may use the records reviewed, information slips, business income reported

on your personal tax return, or information from earlier GST/HST returns to assess the

overdue periods. When the examination is finished, the officer will provide you with the findings

of the examination in a statement of account. They will explain the contents of the statement,

including penalties charged and any applicable interest. If the trust accounts officers find

you owe an amount at the end of the examination, you can pay it by cheque directly to the officer,

or through various online options, which the officer will explain. If the examination was

conducted through your authorized representative, the officer will contact you to discuss the

findings and a statement of account will be mailed to you. If you have any questions,

please contact the examination officer. After the GST/HST trust account examination, the

CRA processes the GST/HST returns you provided to the officer. If you did not provide any

returns or if significant problems are identified during the examination, your file could be

referred for an audit. The CRA will send you a notice of assessment or reassessment after

your returns are processed. Contact the examination officer if you have any questions. If you

don’t agree with the notice of assessment, you can file an objection with the CRA within

90 days of the assessment. To file an objection, use Form GST159 Notice of Objection (GST/HST).

Make sure to include all the relevant facts and explain why you disagree. If you’re

looking for more information about your GST/HST obligations, we recommend the following two

CRA publications: Guide RC4022, General Information for GST/HST Registrants; and Guide RC188,

Keeping Records These are both available at canada.ca/cra-forms-publications. Thank you

for watching.