Let's chat about how to account for a CRA hiring credit for small business (HCSB). I've taken this opportunity to consolidate any questions in the forum and work them into the chat.
Warm up your tea cup, get your HCSB letter/notification from CRA and open up QuickBooks before we get started.
✔ What years is the credit available?
✔ How does the HCSB work?
✔ Can I book an estimate?
✔ How do I record the credit in QuickBooks?
✔ How will the credit affect my T4 summary?
The hiring credit is available for the years 2011, 2012 and 2013. It was NOT extended for the year 2014.
A job credit for small business was introduced in September 2014 as a two year measure to lower EI premiums. It will be in effect for 2015 and 2016. The Small Business Job Credit reduces the EI rate from 1.88% to 1.60%. You do not need to apply as CRA will automatically establish eligibility based on your T4 returns filed. It will apply the refund to your account balance then pay out the remaining balance if there is no outstanding balance on your account.
You qualify for this temporary credit if:
If you are eligible for the hiring credit , CRA will automatically calculate the amount for you from your T4 slips and summary filed. The maximum amount of the credit is $1000.
CRA will send you a letter notifying you about the credit and how it has been applied to your payroll account. Your Statement of Account is the best place to see how the credit was handled.
If you have outstanding payroll amounts due, the credit will be applied against that. If not, CRA will apply the credit to your current payroll year.
You now have two options:
See below on how to record either option in QuickBooks.
The CRA website states:
"What you cannot do while waiting to receive a credit .... Even if you are eligible for the HCSB, you cannot reduce your payroll remittances by the amount of the credit that you think you will receive until we advise you to."
Option One - reduce your next payroll remittance by the amount of the credit
If for some reason your credit is larger than the amount of your payroll remittance, take the maximum amount for the period ... this will create a nil cheque. Remember to still send in / eFile your PD7A ... just don't remit the calculated amount due as your hiring credit offset it. Use any remaining amount on your next remittance.
Option Two - request a refund by direct deposit or cheque.
Reference Source: Intuit Support Article ID: INF18529
At year-end, box 82 on your T4 summary will not match box 80. The difference should be equal to the HCSB amount.
As the HCSB amount is part of your Statement of Account, your payroll account should show a nil balance owing. CRA will know that the difference on your T4 Summary is due to the hiring credit.
I don't know why CRA doesn't revise the T4 Summary form to include a line for the HCSB. My guess is it was because the HCSB was initially introduced in 2011 as a one time temporary credit that keeps getting extended.
Bookkeeping Essentials > CRA Hiring Credit For Small Business
Home > Canadian Payroll Tax Deductions > HCSB Bookkeeping
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