Dealing with taxes and accounting can make anyone’s head spin. There are just so many numbers to keep track of and it can become terribly overwhelming. If you have already registered your business, there’s a good chance that you have also applied for a GST number. You need this number in order to charge tax on your customer’s purchases, but don’t forget about the small business exemption. If your business earns less than $30,000 in Canadian receipts, you do not need to register for GST.

Assuming that you do have a GST number, the conventional way to account for your GST payment to the government is to keep track of all the GST that you have collected, as well as all the GST you have paid on qualifying expenses and purchases. You subtract the latter from the former, arriving at a figure that is then payable to the federal government. If you have relatively minimal expenses — like a freelance writer — then it may be in your best interest to find out more about the quick method of accounting.

Under this system, you do not necessarily have to account for the purchase price and GST separately. There are different remittance rates depending if you own a service or product sales-based business, as well as whether you are in a participating (HST) province or not. You can find these figures on form RC4058.

For example, a freelance writer would remit 3.6% of the total sales. Let’s go through a quick example of a single invoice.

$100 – Sale price
$5 – 5% GST
$105 – Total price paid by customer

The amount of GST remitted to the government would then be 3.6% of $105, which works out to $3.78. The difference — $1.22 — accounts for any GST paid on related expenses without having to go through the actual figures. This is why it’s the Quick method of accounting. It’s not for everyone, so take a look at your expenses and see which method is more advantageous for you. The form to opt in (or out) can be found here.