Entrepreneurship & Small Business

Can someone tell me how exactly taxes , hst, is paid back to the government?

  • Last Updated:
  • Mar 16th, 2019 9:21 am
[OP]
Deal Addict
Oct 17, 2010
1499 posts
189 upvotes

Can someone tell me how exactly taxes , hst, is paid back to the government?

so bit of a vague question and obviously a little more difficult without setting forth personal info but here it goes.

so one of my family members has a small business.

his accountant said he owed around 19,000 in taxes. he pays through those remittence voucher things but by the end of the year the accoundant said it wasnt enough and owes practically half more.

im not an expert nor is he and his accoundant is away till next week so im hoping i can maybe help clear things up.

HSt is 13%, so assuming you had sales/revnue of 50,000 for example, im assuming the amount owed as taxes would be 6500 on that amount.

in ordere to pay 19,000 in taxes to the revnue aaency, his sales (assuming everything was taxed) would be around 150,000. but hes no where NEAR that.

Am I missing something or are there other factors invovled?

i know information still a bit vague but if any of you have more experience with this that can shed some light, that would be great or even provide an example.
22 replies
Deal Addict
Feb 5, 2009
2809 posts
922 upvotes
Newmarket
There is also income tax, back taxes, penalties...….

Other than that just wait for the accountant to come back and ask for explanation.
[OP]
Deal Addict
Oct 17, 2010
1499 posts
189 upvotes
Homerhomer wrote:
Mar 7th, 2019 8:49 pm
There is also income tax, back taxes, penalties...….

Other than that just wait for the accountant to come back and ask for explanation.
income tax is paid separately. our family pays on time so not sure....:/

didnt want to sit the whole weekend pondering. thats alot of money
[OP]
Deal Addict
Oct 17, 2010
1499 posts
189 upvotes
s7yl3x wrote:
Mar 7th, 2019 9:11 pm
An important fact is missing.
what would that be?

forgive my lack of knowledge on how all this works :/
Jr. Member
Oct 27, 2018
110 posts
46 upvotes
Maybe relates more than 1 year ( a cumulative amount)? Just review the calculations. You just cannot suddenly owe $19k based on 50k.
Deal Fanatic
User avatar
Mar 23, 2008
9838 posts
6194 upvotes
Edmonton
The business also has to pay tax. That’s separate from personal income tax and HST. If your accountant can’t explain things clearly, it’s time for a different accountant, because there’s a communication gap somewhere.

C
Penalty Box
User avatar
Jun 24, 2015
2698 posts
587 upvotes
Woodbridge, ON
if you have a business and are a sole proprietor, you work, then you send the invoice to your vendor. The invoice should contain the amount you worked plus HST, your vendor PAYS this to you, you have to keep track of it, when tax time is here, all the HST you received from your vendor, has to be remitted back to the CRA at the deadline, preferably sooner do it the same time as your personal income tax. so you dont pocket that money, you remit it back to the gov't, and the rest of the money thats left, you include that on your T4 as "other source of income" and pay income tax on it. got it?
Hi
Deal Addict
Feb 5, 2009
2809 posts
922 upvotes
Newmarket
GoodFellaz wrote:
Mar 8th, 2019 1:06 pm
if you have a business and are a sole proprietor, you work, then you send the invoice to your vendor. The invoice should contain the amount you worked plus HST, your vendor PAYS this to you, you have to keep track of it, when tax time is here, all the HST you received from your vendor, has to be remitted back to the CRA at the deadline, preferably sooner do it the same time as your personal income tax. so you dont pocket that money, you remit it back to the gov't, and the rest of the money thats left, you include that on your T4 as "other source of income" and pay income tax on it. got it?
Not how it works.
Hst collected net of ITC has to be remitted to cra.
One shouldn't pay anything to the government sooner than needed, although if the amounts are small it doesn't really matter.
Other source of income is not included on T4, T4 is reserved, with very few exceptions for employment income. Other source of income can be included on T4A, but most companies will not issue T4A (this may change going forward if cra starts enforcing it) so the most likely scenario there will be no T slips to rely on, the business will have to calculate their own revenues for the year.
Tax is not paid on revenues, tax is paid on profit.
On T1 (otherwise known as personal tax return) the income and expenses should be reported on form 2125 which is business and professional income, it should not be reported as other income.
For services provided the invoices are send to customers not vendors. You pay vendors for services provided to you.
Deal Addict
Sep 23, 2007
4903 posts
1044 upvotes
Random comments:
-I suggest you clarify what the number is for. Asking him/her directly is probably more productive. Hard for us on a forum to give anything specific
-As others mentioned, could be other types of remittances like payroll deductions or income tax. If you paid a foreign entity you may be subject to withholding taxes. But payroll and income tax are the most common types of remittances aside from HST.
-Accountants can only work with information you give them. Are you sure you provided information that shows $50k sales? Perhaps you provided other transactions that he/she may have classified as sales somehow? For example, a bank deposit could have been owner's contribution
-Further to your example of $50k sales = 6500, you can also deduct HST on expenses you paid. If you had $50k sales, and paid $1.3k HST on 10k of taxable business related expenses, then your net HST payable would be 6500 - 1300 = 5200.
Sr. Member
Nov 13, 2006
988 posts
604 upvotes
Your family member needs a new accountant. That's the only answer you need OP.
Newbie
Mar 9, 2019
6 posts
thatsnazzyiphoneguy wrote:
Mar 7th, 2019 7:55 pm
so bit of a vague question and obviously a little more difficult without setting forth personal info but here it goes.

so one of my family members has a small business.

his accountant said he owed around 19,000 in taxes. he pays through those remittence voucher things but by the end of the year the accoundant said it wasnt enough and owes practically half more.

im not an expert nor is he and his accoundant is away till next week so im hoping i can maybe help clear things up.

HSt is 13%, so assuming you had sales/revnue of 50,000 for example, im assuming the amount owed as taxes would be 6500 on that amount.

in ordere to pay 19,000 in taxes to the revnue aaency, his sales (assuming everything was taxed) would be around 150,000. but hes no where NEAR that.

Am I missing something or are there other factors invovled?

i know information still a bit vague but if any of you have more experience with this that can shed some light, that would be great or even provide an example.
As you said its a vauge question. There should be many parameters and details, you should get professional accountant advice
Run a Canadian Paperless Accounting Firm ( Accerp.com )
Sr. Member
Nov 6, 2015
719 posts
314 upvotes
Guelph, ON
asifnana wrote:
Mar 9th, 2019 9:25 pm
Your family member needs a new accountant. That's the only answer you need OP.
You have no way of judging this, all you are getting is the OP's interpretation of what the accountant said, and is very likely he didn't even hear this direct from the accountant himself, but is relaying second hand from what his family member told him the accountant said. We are getting hear say, twice removed from the source.

I'm quite sure the OP is not giving us a precise transcription of what the accountant said.

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