Input Tax Credit Review Yields Big Refund for a Startup

A fast-growing Montreal startup believed it was losing money because its GST/QST refunds kept coming back lower than expected or not at all. After months of confusion and multiple verification letters from Revenu Québec, the founders called Mackisen for help. What followed was a complete turnaround that resulted in a significant GST/QST refund, faster filings, and an audit-proof system for future periods.

This success story shows how a detailed ITC/ITR review uncovered hidden entitlements and fixed the issues holding the business back.

The Problem: Refunds Were Being Denied or Reduced

The startup struggled with:
• missing supplier invoices
• incorrect GST/QST tax coding in the accounting software
• digital SaaS receipts that were never saved
• inconsistent bookkeeping
• personal expenses mixed into the business account
• vendor invoices without GST/QST numbers
• unpaid invoices mistakenly claimed for ITCs/ITRs

Revenu Québec repeatedly:
• froze refunds
• sent requests for documentation
• questioned ITC and ITR eligibility

Cash flow became a major issue.

The Audit Trigger

A refund verification letter from Revenu Québec demanded:
• proof of payment
• invoices for each expense
• supplier GST/QST registration numbers
• detailed ITC/ITR schedules
• bank statements
• general ledger extracts

The business was not prepared.

How Mackisen Turned the Situation Around

Step 1 — Comprehensive ITC/ITR Audit

Mackisen performed a full internal audit of:
• all expenses
• bookkeeping entries
• tax coding
• GST/QST eligibility
• missing invoices
• recurring digital subscription receipts

Dozens of errors were found both overclaimed and underclaimed credits.

Step 2 — Reconstructing Missing Documentation

The team:
• contacted vendors for duplicate invoices
• downloaded digital receipts from SaaS platforms
• collected proof of payment for all major expenses
• organized all documentation into audit-ready folders

This ensured every credit claimed was defensible.

Step 3 — Correcting GST/QST Tax Coding

The accounting system was fixed to:
• separate GST, QST, HST, and zero-rated items
• avoid double-counting
• classify capital vs operating expenses correctly
• eliminate personal expenses from business books

This prevented future errors and refund delays.

Step 4 — Preparing a Strong Response for Revenu Québec

Mackisen created a complete ITC/ITR support package including:
• detailed schedules
• invoice indices
• reconciled totals
• explanation letters
• proof of payment sets
• supplier registration verification

The submission was clearer and more thorough than what auditors typically see.

Step 5 — Filing Adjustments for Underclaimed Credits

During the review, Mackisen found that the business had:
• underclaimed significant ITCs and ITRs in previous periods
• missed tax credits for software, marketing, equipment, and contractors

Adjustments were filed to recover these amounts.

The Outcome

The startup received:
• a large refund covering multiple periods
• acceptance of all ITCs and ITRs claimed
• no penalties
• no further verification requests
• a clean account with Revenu Québec
• accurate accounting systems for future periods

The founders finally gained financial breathing room.

Key Lessons

• Missing invoices kill refunds organization is essential
• Underclaimed credits often offset overclaimed ones
• Proper tax coding matters as much as documentation
• GST/QST refunds are not automatic they must be proven
• A CPA-led ITC/ITR review can uncover significant hidden refunds

Client Quote

“We didn’t realize how much money we were leaving on the table. Mackisen found credits we never knew we were entitled to.”

Common Questions

What causes refunds to be denied?
Missing documentation and incorrect coding are the most common reasons.

Can I recover credits from past years?
Yes through adjustments if the statutory deadline hasn’t passed.

Do digital subscriptions qualify for ITCs/ITRs?
Yes if they are business-related and properly documented.

Can a CPA speed up refunds?
Organized documentation leads to faster approval.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps startups and growing businesses optimize GST/QST refunds, correct bookkeeping errors, and maintain audit-ready records.