Tax |
In Canada, how you record taxes on disbursements depends on the activity or situation.
There are cases where:
- Taxes paid on disbursements are not included in the firm's Input Tax Credit (ITC)
- Disbursements are not taxable to the client
- Your firm pays the disbursement as the client's agent and the entire disbursement amount, inclusive of taxes, passes through to the client as a cost.
Entering tax amounts on business expenses allows you to track taxes paid for:
- Accounts payable bills
- Operating bank withdrawals
- Credit card charges
"Disbursement incurred as agent" refers to a matter-related expense (hard cost) where the entire expense, inclusive of taxes, merely passes through the firm's books. This means that the firm doesn't claim an input tax credit (ITC) for the taxes paid to the vendor, and the firm doesn't charge taxes when it invoices the hard cost to the client.
You can record and track payments your firm makes to CRA.
When you create or edit an invoice, the summary section's Total Tax Applied field displays the sum of taxes.
Canadian lawyers use Teranet/Teraview and other land title registry services to perform conveyancing related activities such as performing title and writ searches and recording registrations.
Input Tax Credits (ITCs) are the sum of the allowable GST/HST paid on business expenses. Input Tax Refunds (ITRs) are the sum of the allowable QST paid on business expenses.
This table lists where in the application, you can find the information needed to complete your GST/HST tax filings.
As a default, the application tracks collected GST/HST in the 2201 GST/HST Collected General Ledger (GL) and taxes paid in the 2202 GST/HST Paid GL.
However, many firms prefer tracking all tax amounts collected and paid in one GL account.
This article will outline how to set up the application to track these taxes in one combined GL account, how to print the combined report, and where to find the tax return line item information on the combined report.
A client or matter may have a tax status or rate that differs from the firm's default settings. You can override those settings within each matter.
You may encounter expense items that must be charged a different rate than the firm's default.
When entering an expense, you can change the tax defaults as well as override the tax rate.
In British Columbia (BC), once collected, PST charged to a client via an invoice is paid to the BC government. If paid on time, the firm is entitled to a PST commission in the form of a remittance reduction.
You can choose to adjust the tax rates for particular fees and expenses without changing the default tax settings, or for all billable activities, if needed.