CRA Compliance
The errors we see most often in Ontario small business books — and how to fix them before the CRA flags your return.
Filing HST sounds simple: collect tax on sales, claim credit on purchases, send the CRA the difference. In practice, it's one of the most error-prone parts of small business bookkeeping — and the mistakes are rarely intentional. They're usually the result of inconsistent record-keeping, software defaults, or not knowing exactly what the CRA requires.
After two decades of bookkeeping for Ontario small businesses, these are the five HST mistakes I see most often — and what fixing them actually looks like.
The CRA requires supporting documentation for every input tax credit (ITC) claim — and for purchases above certain thresholds, that documentation must include the supplier's GST/HST registration number. A lot of small businesses claim ITCs based on a bank statement line item alone, with no invoice on file. If the CRA reviews the return, those credits can be denied outright, and you're suddenly on the hook for tax you thought you'd already offset.
Some bookkeeping setups record HST collected on sales as straight revenue, instead of keeping it in a separate liability account. By the time the filing deadline arrives, the business has already spent the tax it owes the CRA — because it never looked separate from regular income in the books. This is one of the most common cash flow surprises we fix during catch-up bookkeeping engagements.
HST filing frequency (monthly, quarterly, or annual) is assigned by the CRA based on revenue, and each comes with its own due date. Missing a deadline triggers penalties plus daily compounding interest — starting the day after the due date, regardless of whether you eventually file correctly. Businesses on annual filing are especially prone to forgetting, since the deadline only comes around once a year.
Not everything is taxed the same way. Some goods and services are zero-rated (taxed at 0%, but you can still claim ITCs), while others are fully exempt (no HST charged, and ITCs generally can't be claimed on related costs). Businesses that sell a mix of taxable and exempt goods or services — common in healthcare-adjacent, education, or certain financial services — frequently apply the wrong treatment, which throws off both the amount collected and the amount claimed.
If your worldwide taxable revenue exceeds $30,000 over four consecutive calendar quarters, HST registration is mandatory — not optional. Some businesses miss this threshold and keep operating without charging HST, creating a liability that accumulates retroactively. On the flip side, some businesses that drop below the small supplier threshold keep filing and charging HST unnecessarily, adding administrative work for no reason.
None of these are signs of carelessness — they're what happens when bookkeeping is handled in the gaps between running the actual business. Accounting software can record a transaction, but it can't tell you whether an item is zero-rated, whether a receipt meets CRA documentation standards, or which filing frequency you've been assigned. That judgment comes from experience with the rules as they actually apply in Ontario.
The CRA charges a late-filing penalty plus daily compounding interest on any amount owing, starting the day after your filing due date. Repeated late filings can also increase scrutiny on future returns.
Generally no. The CRA requires supporting documentation for ITC claims, including the supplier's GST/HST registration number for purchases over certain thresholds. Claims without proper documentation can be denied during a review.
If your worldwide taxable revenues are $30,000 or less over four consecutive calendar quarters, you may qualify as a small supplier and aren't required to register for or charge HST — though you can register voluntarily if it benefits you (for example, to claim ITCs).
Book a free 30-minute call — we'll review your current setup and flag anything that needs fixing.
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