How to use Quick Method to calculate HST remittance
April 7, 2011 – 2:03 pmThere was some discussion on a PWAC writers’ forum about how to use the Quick Method to calculate how much HST to remit to the government. I asked tax consultant, and former PWAC member, Sunny Widerman for her take on using the Quick Method to remit your HST payment. Thought I’d post her reply here as well. – Paul
Note: All figures are for Ontario. Figures may change for your province.
**********
When you use the Quick method to remit your HST payment, the HST you collect becomes part of your income. What you remit is a percentage of that income.
So while you collect HST on top of your fee at 13%, you remit 8.8% of the total collected, including HST.
Take this example: If your fee was $1,000, you’d bill the client $1,130. When it came time to remit, you’d remit 8.8% of $1,130.
You do pay an increased amount if you collect more than $30,000 in fees, but it’s not an increased rate. What happens is that after you calculate the HST to remit using the outline I’ve given here, you calculate 1% of your freelance income or $300, whichever is less, and you get that back. Essentially it’s a rebate that runs out once you cross that $30,000 threshold.
Sunny Widerman,
Personal Tax Advisors
Learn more and sign up for free tax tips
at www.personaltaxadvisors.ca
************
11 Responses to “How to use Quick Method to calculate HST remittance”
This is going to be one popular post! Do you still have to register/ elect to use the quick method? I mean, you can’t just decide to do it, the CRA has to let you.
Next, maybe you could post a simple list from Sunny that shows what HST we should be charging based on where the client’s office is. (Well, as it applies to “intellectual” products such as writing and editing. This is another common question.
By Adrienne Montgomerie on Apr 7, 2011
You actually have to “elect” to use the Quick Method — you have to tell the CRA ahead of time that you want to use it. You apply through a form, available online, and need to wait for CRA approval before you use the Quick Method. Whether you’re financially better off with it depends on whether or not you normally have expenses on which the HST adds up to more than 8.8 per cent of your income (or 7.8 per cent while you’re still below $30,000.) With higher expenses, you’re better off deducting the actual receipts from your HST payment. You can’t flip back and forth between Quick and Long. Once you adopt the Quick Method, you have to keep using it, until you unelect it. For Freelance writers, the Quick Method probably makes the most sense, but check with your tax advisor or accountant, i.e., don’t take my word for it.
By Paul Lima on Apr 7, 2011
Hey Paul, long time no speak. Thanks for the post.
I’m curious about charging HST on income earned from outside of Ontario, and outside the country. For example, if 10 per cent of my freelance income comes from the United States, do I charge these clients HST? Can I really? Am I responsible for paying HST on that income?
If you’ve already answered this in previous posts, sorry for missing it.
By Tyler Hamilton on Apr 24, 2011
Good to hear from you… I’d suggest you contact Sunny, after tax season, to make sure you are doing the HST thing right. However, my take on it is this: You do not charge US publications or clients HST, therefore you do not collect or remit HST. You charge out of province clients who don’t have HST the GST rate… I confess, I’m not sure what you charge them if they have HST but at a different rate. Sunny would know; any accountant should know. CRA might even answer that question for you if you were to call. What a screwed up system we have!
By Paul Lima on Apr 24, 2011
Thanks Paul… I’ve been trying to find an answer on the CRA website but, sadly, there’s little recognition specifically of freelance services. Lots of talk about advisory, consulting, research, and professional services, but nothing about writing. From what I’ve gathered, however, and I agree with you, I shouldn’t — nor would I really get away with — charging a foreign client HST. If that’s the case, however, it means I have to reconsider using the Quick Method… I’m sure at some point, paying 8.8 per cent remittance on total revenue collected becomes less attractive if a substantial portion of that revenue is outside of Canada. A person may end up paying more HST than they need to… It’s all very fun, isn’t it?
By Tyler Hamilton on Apr 24, 2011
I believe you’d only pay the 8.8% on the revenue for which you charged HST. Again, though, you should confirm that. But my take is that you can use the QM and you wouldn’t have to apply it to your US revenue.
By Paul Lima on Apr 24, 2011
Thanks Paul… does Sunny charge for these questions?
By Tyler Hamilton on Apr 24, 2011
No idea, but ask her. I can’t imagine it would cost a lot to get the answers you need. It’s not like doing your books or your taxes. And if it means you are doing your HST right, then it would be well worth it!
By Paul Lima on Apr 24, 2011
i was wondering how you figure out the amount of HST that was collected. Im working from bank statements and amounts deposited… How do i go back and figure out how much Hst was collected
By Terri on Oct 29, 2012
In Ontario, we charge 13% HST. So if I charged you a dollar, I’d have to send you an invoice for $1.13: $1 + ($1 x 13%). If I invoiced you $15 and turns out I was supposed to charge HST and had to calculate how much of that $15 was HST, I’d use this formula: 15/1.13 (13.27). I’d then subtract that amount from the $15 for an HST total of $1.73. Note: I am not an accountant and do not pretend to be, so take anything I say about money under advisement!
By Paul Lima on Oct 29, 2012
I’m not sure I agree with Paul here when he talks about the 1% of the first 30,000. It’s a rebate on the first 30,000. If you make 45,000 you still get the 1% back on the 30,000. You just don’t get the 1% back on the next 15,000. Or maybe that’s what he’s trying to say. I kind of read it like, once you pass 30,000 you don’t get the 1% on the first 30,000. But I’ve been do this for a few years now and know that’s not the case.
FROM CANADA REVENUE WEBSITE
Credit of 1% on the first $30,000 of
in each fiscal year.
eligible supplies
In calculating your net tax using the quick method, you are
entitled to a 1% credit on the first $30,000 of your eligible
supplies (including the GST/HST) on which you must
collect the GST at 5% or the HST at the applicable rate (see
the chart on page
To qualify for the 1% credit, your quick method election
must be in effect at the beginning of a fiscal year or, if you
are a new registrant, on the day you became a registrant.
If you file monthly or quarterly GST/HST returns, the 1%
credit applies to the first and the following reporting
periods of a fiscal year until you reach the $30,000
threshold, or the fiscal year ends. If you file annual
GST/HST returns, use the 1% credit on your first $30,000
of eligible supplies in that fiscal year.
If the 0% remittance rate applies to your eligible sales, you
are entitled to the 1% credit in addition to the credit given
to businesses that purchase goods for resale (for more
information, see the remittance rates chart on page 9).
Note
If you do not make $30,000 in eligible supplies in a fiscal
year, you cannot carry forward any unused portion of
the credit to a later fiscal year.
By Bryan on Feb 4, 2013