Tracking input tax credits throughout the year is one of the most important habits a business can develop to stay compliant with GST/QST rules. Input tax credits represent the GST and QST paid on business expenses, and claiming them correctly ensures your tax payable is reduced. However, many businesses fail to claim all eligible credits because their documentation is incomplete, their expenses are not categorized properly, or their receipts are not stored in an audit-ready manner. Failing to track input tax credits properly leads to lost tax savings, increased audit risk, delayed refunds, and inconsistent GST/QST returns. This guide explains how to track input tax credits throughout the year, how to organize documentation, and how to ensure your GST/QST filings remain accurate.

Input tax credits must be supported by proper invoices, receipts, contracts, and proof of payment. The CRA and Revenu Québec require businesses to maintain meticulous documentation for all expenses that include GST and QST. Tracking credits year-round ensures that you do not rely on rushed year-end reconciliation or incomplete records. It also helps you identify issues early and avoid GST/QST reassessments.

LEGAL AND REGULATORY FRAMEWORK

Input tax credits are governed under the Excise Tax Act for GST and the Quebec Taxation Act for QST. These laws allow businesses to claim credits for GST/QST paid on eligible commercial activities. To claim input tax credits, expenses must be reasonable, directly related to commercial operations, and supported by compliant supplier invoices. Revenu Québec requires invoices to include the supplier’s name, address, GST/QST registration numbers, detailed descriptions of goods or services, amounts charged, and the applicable taxes.

Businesses must maintain records for at least six years after the end of a tax year. Records must be organized, traceable, and complete. If documentation is missing or unclear, Revenu Québec or CRA may deny the input tax credits. Tracking input tax credits throughout the year ensures that all documentation meets legal requirements and supports accurate GST/QST filings.

KEY COURT DECISIONS

Court decisions across Canada consistently state that the burden of proof for input tax credits lies entirely with the taxpayer. In several rulings, CRA and Revenu Québec denied input tax credits because invoices were missing supplier GST/QST numbers, did not clearly describe the services, or lacked proof of payment. Courts upheld these decisions, reinforcing that proper documentation is mandatory.

In refund-related cases, courts noted that businesses must demonstrate actual payment of GST/QST and maintain date-accurate documentation. Verbal explanations or spreadsheets were not accepted as substitutes for compliant invoices. These rulings underline the importance of tracking input tax credits throughout the year and keeping complete, verifiable documentation.

WHY CRA AND REVENU QUÉBEC TARGET THESE ISSUES

CRA and Revenu Québec closely monitor input tax credits because this is a common area for error and fraud. Businesses often misclassify personal expenses as commercial activities, fail to keep receipts, or claim credits for ineligible purchases. Large or inconsistent credit claims often trigger refund reviews or audits.

Other audit triggers include incomplete invoices, credits claimed for exempt activities, mismatched numbers between GST/QST returns and income tax filings, and significant fluctuations in expenses. When businesses track input tax credits throughout the year, these inconsistencies can be identified early and corrected before filing.

MACKISEN STRATEGY

Mackisen CPA helps businesses build year-round systems to track input tax credits accurately and consistently. Our approach includes reviewing invoices monthly, verifying GST and QST amounts, checking supplier registration numbers, and organizing documents in digital folders categorized by month and expense type. We also set up cloud-based accounting software that captures receipts instantly using mobile apps, ensuring that no documentation is lost.

Mackisen reconciles input tax credits with GST/QST return periods, confirming that expenses align with your filing frequency. Our firm identifies ineligible expenses, corrects misclassified transactions, and prepares audit-ready documentation packages. We perform periodic internal GST/QST compliance checks so clients can file returns with confidence.

REAL CLIENT EXPERIENCE

A Montreal retailer frequently misplaced receipts and recorded expenses manually. Revenu Québec audited their input tax credits and questioned thousands of dollars in claims. Mackisen implemented a digital receipt-capture system and monthly reconciliation process. Subsequent audits were closed with no adjustments.

An online business claimed high input tax credits but lacked supplier GST/QST numbers on many invoices. Mackisen contacted vendors, obtained proper invoices, corrected bookkeeping entries, and avoided reassessment.

A construction company tracked expenses inconsistently and claimed credits for purchases unrelated to commercial activities. CRA froze their refund. Mackisen reviewed each transaction, identified ineligible credits, corrected filings, and resolved the refund delay.

COMMON QUESTIONS

What documentation do I need to track input tax credits
You need detailed invoices showing supplier information, GST/QST amounts, descriptions of goods or services, and proof of payment.

Do I need to track credits monthly
Monthly tracking is best because it prevents missing receipts and ensures accurate GST/QST filings.

Can CRA or Revenu Québec deny input tax credits
Yes. Credits can be denied if invoices are incomplete, the expense is ineligible, or documentation is missing.

How do I track input tax credits digitally
Use cloud-based accounting platforms with receipt-capture apps that store invoices and categorize expenses automatically.

Are input tax credits tracked differently for annual filers
No. All filers must track expenses year-round, regardless of filing frequency.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you need help organizing your records, reviewing input tax credits, or preparing audit-ready GST/QST filings, our expert team ensures precision, transparency, and protection from reassessment risk.