The tax deadline for the tax return has gone. Suddenly, you have realized you file your HST return in Ontario with an unintentional error or omission. Now you are wondering what you should do. In the first place, you should avoid committing mistakes in filing tax returns. A CPA (Chartered Professional Accountant) of an accounting firm can help you with tax-related matters. Thus, consult a tax expert to file your returns and avoid any possible consequences from the CRA (Canada Revenue Agency). However, if you mistakenly filed your HST return and submitted it to the CRA, you should not panic. Let us see whether amending can help in such a case:
Is Amending the Return Mandatory?
Filing GST (Goods and Services Tax)/HST (Harmonized Sales Tax) is a simple exercise. Still, professional practitioners and business owners can find errors on a filed return. If you filed HST return with error (s) in Ontario, you need to discuss it with a tax professional. At times, you cannot amend the return owing to some reasons. In other words, you cannot rectify your mistake. Here are some of the items to consider when finding out how to address an error on a filed return:
- Neglected ITCs (Input Tax Credits): Lawfully, a GST/HST registrant has the right to retroactively claim ITCs on a recent return for the formerly missed credits. Mostly, registrants can claim those anytime within the period of 4years. However, for some, the time deadline is the last two years, in addition to the current fiscal year. Consequently, the CRA has a policy not to permit a return for amendment for missed ITCs. Thus, the registrant needs to claim the neglected ITCs on the next return.
- Additional GST/HST Liability: Understating the GST collected on sales or overstating ITCs in a period may be the reason for a missed liability. Missed liability may result owing to a number of other issues. Typically, the CRA allows a registrant to amend a return when it comes to liability. There is an exception; you cannot amend a reporting period or return when the CRA has a prior audit activity. For example, a registrant may claim a refund in a reporting period flagged for review about the ITCs before getting the refund. After some time, the CRA finds out GST was underreported. You try to amend the return, but CRA denies your request. Plus, you have to remember that you cannot amend an HST return in Ontario because you disagree with the assessment. Instead, you can file a Notice of Objection using form GST159.
Taxpayer Can Be at Risk in Amending Returns:-
You are at risk with amending returns because it communicates you have not the best record-keeping or systems. As a result, the CRA can use your information to determine whether to invest your resources into an expanded review. In other words, an amended return can lead to auditing of a registrant. If you consult a tax expert to help to amend returns, you will save yourself from the CRA audit. Conversely, if you have made a big error in your HST return, you have to try and amend it. Pay the interest charges and prevent any more interest from accruing and save yourself. But what if the error is not substantial? What should you do then?
What Other Considerations Do You Have?
Here are the other considerations to look at when deciding about the amendment:
- Has the error come from a single transaction? Or from a recurring transaction of the past?
- Is the error owing to the reporting time?
- Should you consider a voluntary disclosure or a fairness policy request?
- Is the right action to go forward and not backwards?
How Can a Tax Professional Help to Decide about Amending an HST Return?
Before you make your decision to request the CRA to amend a return, discuss your problem with a tax expert. A tax professional can guide you about the best actions concerning an amended return. Even if the amendment is not the right option, a tax expert in Ontario can suggest you the best action.
You can make a mistake by filing your HST return in Ontario with an error and realize it afterward. Should you consider amending your return in such a case? Amending is not always mandatory if you consider the following two reasons:
- CRA has a policy not to allow a return for amendment for missed ITCs.
- You cannot amend a reporting period or return when the CRA has a previous audit activity.
You are at risk with amending returns because it conveys you have not the best record-keeping or systems. Consequently, the CRA may audit you. Therefore, you need to consider all the available options wisely for amending an HST return. Lastly, consulting a tax expert can always help you make the right decision whether to amend a return or not.
Sohail Afzal is a CMA (Certified Management Accountant) and the Founding Partner of a professional accounting firm, GTA Accounting. He understands the needs of small-scale businesses & corporations and offers them tax advice to overcome their tax burdens. He is a professional author who often writes articles related to accounting.