BN and GST
GST Return Reporting Errors and Frustrations
I recently acquired a new client and I'm just looking for some advice. I have spent too much time on CRA's website without any luck. A CRA request for reporting the GST on sales was ignored as s/he figured there were no sales so they didn't have to report it!
S/he was a real estate agent and their broker looked after all the GST remittances. S/he then transferred to a new real estate company who did not calculate or submit any GST on his/her behalf. S/he quit within a few months of this transfer due to illness.
Here is the problem as I see it. S/he started a new company but figured the gross sales weren't enough to charge GST so s/he didn't; which was fine because sales were well under the $30,000 threshold. However s/he never told anyone about this new company; not the accountant or the CRA. Now the CRA have estimated the sales and assessed the business owner accordingly. Penalties and interest, for quite a large sum, were also assessed.
Personal tax returns for the three years were filed.
So my question is, does s/he need to aquire a new number for the new business or keep the one s/he has?
Do we just have to fill out the past 3 years remittances as zero sales?
Can s/he opt out of the GST all together because s/he doesn't anticipate ever grossing near the threshold?
Thanks. Love the website! Such a wealth of information all in one place!
Well, the first lesson I hope everyone learns from reading this post is that nil returns MUST always be filed. How does CRA distinguish between a nil return and a return with sales if they are not informed and/or the account closed? They can't. So in the absence of information, they will assess based on past history ... as was done in this instance.
You never stated the business structure. I will assume s/he was not incorporated. If that is in fact the case, sole proprietors only get one BN from CRA. This is true even you stop a business and create a new business a few years later, CRA will issue you the same BN. What may change based on circumstances are the numbers following the nine digits .. i.e. RT0001 is for business one; RT0002 would be for a concurrent second business.
So as far as I know, s/he will have
no option but to keep the same BN ... CRA can verify this for you.
You can no longer just file the returns. You have to dispute CRA now. See www.cra-arc.gc.ca/gncy/cmplntsdspts/gsthst-tpstvh-eng.html to learn the process and forms required.
I just wanted to point out ... if the past three years had no gross sales, then that is what gets reported. However, it sounded to me as if there were sales under $30,000. I'm fairly certain GST must be collected on these sales if the GST account was never deregistered. You don't get to just stop. There is a procedure to go through to deregister your GST account
I can hear the exasperation ... but it was under a different business!
Here is my understanding. Sole proprietors are their business as opposed to corporations which have their own unique identity separate from the shareholders. This means when a shareholder dies, the business does not cease to exist. When a sole proprietor dies, the business is deemed ceased and valued as of date of death at fair market value.
Sole proprietors generally operate under a DBA ... doing business as ... name. For example, Jane Smith dba Jane's Real Estate Services. Changing the dba name doesn't change the fact that it is still Jane Smith's unincorporated business.
I don't know all the circumstances pertaining to this event, but you may want to consider submitting a Fairness Application
(see point 4) for relief from penalties and interest due to the illness. Timing and dates would be important here in order to determine if there is merit in doing so.
As with most business lessons, the learning curve can be costly ... which is why I always recommend small business owners have some kind of business adviser to consult prior to acting. As this particular business owner seemed to have / has an accountant, it would be prudent to get their advice prior to filing the overdue GST returns as there may be ripple effects ... i.e were the sales under the $30,000 threshold reported net on the personal tax return?P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.