Quick Method of Accounting (GST/QST)
We called upon your services last year for our annual income tax return.
We own a registered business managed by two self-employed workers (general partnership).
I would like to know about the advantages of the Quick Method of Accounting offered by the Government of Québec.
Is it more advantageous to use this method?
Thank you in advance for enlightening me about this matter.
Have a nice week.
Dear Mr. Gatineau:
To make the matter easy to understand, I will compare both methods for you.
The general method for calculating the taxes is as follows: you must remit the total amount of the taxes invoiced to the client, but you can be reimbursed for the taxes on taxable expenses.
Example 1: (Sales of $1,000 + taxes = $128.75 in taxes that you must remit) MINUS (TAXABLE expenses of $500 + taxes = $64.38 in taxes to be reimbursed to you) = $128.75 – $64.38 = $64.37 in net taxes that you must remit
Example 2: (Sales of $1,000 + taxes = $128.75 in taxes that you must remit) MINUS (TAXABLE expenses of $200 + taxes = $25.75 to be reimbursed to you) = $128.75 – $25.75 = $103 in net taxes that you must remit
With the Quick Method, taxes on expenses are not considered; only part of the invoiced taxes are remitted regardless of the taxes paid on expenses (with a few exceptions, capital property for example).
Example 3: Sales of $1,000 + taxes X QUICK FORMULA = $97.62 in taxes that you must remit
Therefore, this method is advantageous if your taxable expenses are small compared to your taxable sales. Above a certain threshold where both methods are equivalent, the general method is more advantageous. If the ratio of taxable expenses to taxable sales is below the threshold, it is more advantageous to use the Quick Method of Accounting.
Please note that there are conditions for registration. For example, you must make less than $215,000 in annual sales (GST included). Also, certain types of businesses cannot register.
You must request the change at specific dates and can only do so after a minimum period of time has elapsed if you are already registered for the other method.
I hope that this clarifies the issue for you. However, if you would like further information, you will have to make an appointment given that the subject is very complex and that I could talk about it for hours. A one-on-one meeting would be effective for we could optimize all your practices.
I look forward to working with you.