GST Return – Filing Woes

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I normally try to leave my clients out of this blog .. but something happened today that, in my opinion, makes a good learning example of what NOT to do – when filing Goods and Services Tax (GST) Returns. In my client’s case, the company is a monthly filer.

For monthly GST filers, the return for the current month has to be filed by the end of the following month. It’s pretty much the same for quarterly GST filers, where the return for the 3 months of the last fiscal quarter is due by the end of the following month. Canada Revenue sends GST registrants preprinted forms with the preprinted period dates and due date usually, just prior to the end of the current month – so you will have the form to use for the next month when it is due.

For monthly PST filers, the return for the current month has to be filed by the 20th of the following month. But, directly on the (at least) Manitoba PST returns .. it shows the amount of the last payment made prior to printing this blank “pre-printed” form. Unlike the PST forms – the GST forms do not show that amount. But, the period that the GST return is covering .. is still on the return itself.

If you do not have a pre-printed form, you can always use a blank GST form .. although it has to be a real blank form – and not a photocopy of a form. Especially if you intend on paying any balances due at the bank – they won’t accept photocopies with your payment! This is what one looks like – but .. BE CAREFUL TO PROPERLY FILL OUT THE PERIOD OF THE RETURN THAT YOU ARE COVERING!

This is what happened with my client .. which started back in October 2005

* GST Return for the month of September 2005 (pre-printed form received in late September 2005) was prepared October 30th using the figures of September 2005 that I calculated – and showed a balance due. The client issued a cheque, stapled it to the filing copy of the return (Bottom Part) and hand delivered it to Canada Revenue Agency – main branch at the drop slot.

>> AS THEY WERE DOING FOR EVERY OTHER MONTH PRIOR TO SEPTEMBER 2005. Then – it went all wrong!

* On November 30th, I provided my client the figures for the October 2005 period. In their possession, they had two pre-printed GST returns … the REAL October 2005 pre-printed return, that they received just before the end of October 2005 .. and the REAL November 2005 pre-printed return which they received in late November 2005.

>> THEY PREPARED THE OCTOBER 2005 FIGURES ON THE PRE-PRINTED NOVEMBER 2005 RETURN!

* Naturally, on December 30th when I provided my client the figures for the November 2005 period … they didn’t have the November 2005 pre-printed return (since they used it already!) So, they used the next best thing available .. the December 2005 pre-printed return.

Needless to say .. this has been repeating every month between October 2005 and April 2006 with my client. They have been preparing the current mont’s GST return figures on the following month’s pre-printed return, attaching a cheque to the return, and then hand-delivering it directly to Canada Revenue Agency.

>> THEN MAY 2006 HAPPENED – AND THERE WAS A REFUND!

My client still hand delivered the GST return for the May 2006 period on the last day in June 2006, but it was showing a small refund – and no cheque was attached.

This is what I found out today .. from the GST department in Ottawa regarding my client.

1) The October payment was received and is showing as a credit on the account – unapplied to any GST return.
2) The November payment was received and is applied against the October GST return (November filed on the October pre-printed return)
3) Rinse and repeat every month up to April 2006 (ditto, ditto, etc, etc)
4) There was no payment attached to the May 2006 return (filed on the June 2006 return) so – now there is a balance due .. The balance being the April REAL GST return (prepared on theMay 2006 pre-printed form) plus/minus the differences the way CRA has been allocating payments each month to previous GST returns filed … what a mess!

Now – Two GST returns are outstanding – October 2005 and June 2006, but June 2006 isn’t due until July 31, 2006. The first October 2005 return filed and paid .. is showing being paid by the November payment. The October payment is being shown on account as a credit. The May GST Return filed on the June pre-printed shows a refund – so, no payment was made to be allocated to the April GST return – filed on the May 2006 return.

Is it making sense? It’s very confusing .. and it gets worse!

Basically, this is the Readers’ Digest version today. Let’s assume that each return averages about $2,000.00 balance due and in a perfect world was that amount every month except for this last month – filing a refund of ($500.00). Technically – there is a refund owing of $500.00 to my client because that was the last return filed, and everything else was paid.

Canada Revenue agency shows the last return May 2006 (really April 2006) owing $2,000.00 … the initial October 2005 pre-payment or credit on account doesn’t exist on their screens – and the refund is not yet due … Result? Collection Agent.

The GST Department has assigned a Collection Agent to collect $2,000 from my client – when they really have a refund owed to them. To correct this “situation” .. I now spent my morning today obtaining the original copies of what was actually filed, RE-PREPARED these returns on blank returns with corrected period dates on them, and so on and so on, and fax them over to the Administration office of the GST department. Now it’s up to them to fix everything back to what it should be – and I’m expecting more phone calls to correct this mess.

Of course .. someone will be billed for my time – the client. Time will be added to the next monthly bill.

Conclusion:

Take that extra step to be sure that you are preparing the current return information on the proper pre-printed form .. before something like this could happen to you. It’s quite easy to make sure this doesn’t happen to you – use the right forms!

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