YEAR-END SALES TAX CHECKLIST: PREPARING GST/QST FOR TAX SEASON

Year-end is one of the most important moments for Quebec businesses to verify their GST and QST accounts. Whether you file monthly, quarterly, or annually, year-end reconciliation ensures that your sales tax records are accurate and ready for both your FPZ-500-V return and your financial statements. Ignoring year-end adjustments can lead to mismatches between GST/QST filings and financial results, triggering refunds delays, corrections, or even Revenue Québec audits. This comprehensive checklist explains exactly how to prepare your GST/QST accounts at year-end for a smooth, compliant tax season.

A strong year-end process helps businesses correct errors from earlier in the year, finalize input tax credits, reconcile tax control accounts, and prepare for any future audit.

LEGAL AND REGULATORY FRAMEWORK

Year-end GST/QST preparation is governed by the Excise Tax Act and the Quebec Taxation Act. Businesses must ensure that all amounts reported throughout the year—taxable sales, zero-rated transactions, exempt supplies, input tax credits, and adjustments—are accurate and supported by proper documentation. All records must be kept for at least six years.

Revenue Québec may compare your annual financial statements with the totals in your GST/QST returns. Large discrepancies can trigger questions, refund reviews, or formal audits. Completing a structured year-end checklist significantly reduces these risks.

KEY COURT DECISIONS

Courts consistently uphold that businesses must maintain accurate year-end records. In several cases, taxpayers attempted to justify missing receipts or unexplained adjustments, but judges ruled that proper documentation is required. Courts also confirmed that inconsistent reporting between GST/QST filings and financial statements is grounds for reassessment.

In other cases, businesses attempted to retroactively claim late ITCs without proper evidence. Courts denied these claims, emphasizing that year-end preparation is crucial for preserving rights to claim credits.

WHY CRA AND REVENU QUÉBEC TARGET YEAR-END ISSUES

Year-end is when most discrepancies become obvious. Revenue Québec focuses on:
• mismatches between sales totals and GST/QST returns
• large year-end adjustments
• missing documentation for ITC claims
• incorrect classification of taxable vs. exempt supplies
• differences between bank deposits and reported revenue
• inconsistent tax coding in POS systems

Businesses with seasonal operations, rapid growth, or inconsistent bookkeeping are more likely to face scrutiny.

YEAR-END SALES TAX CHECKLIST: PREPARING GST/QST FOR TAX SEASON

1. Reconcile total annual sales
   Match annual revenue from your accounting system, POS reports, and bank deposits. Ensure taxable, zero-rated, and exempt sales are clearly categorized.

2. Review GST/QST collected
   Calculate total GST and QST collected throughout the year. Compare these amounts to what was reported in each filing period. Resolve discrepancies before finalizing year-end.

3. Reconcile GST/QST control accounts
   Compare the balances in your general ledger’s GST/QST accounts (collected and paid) with actual transactions. Any differences may require adjustments.

4. Confirm input tax credits and refunds claimed
   Review all supplier invoices to verify:
   • GST/QST registration numbers
   • invoice dates and details
   • tax amounts
   • business-related nature of expenses
   Ensure only eligible expenses were claimed.

5. Identify missing invoices or receipts
   Request copies from suppliers. Missing documentation is the number one cause of denied ITCs.

6. Review credit notes, refunds, and bad debts
   Verify all adjustments are recorded and reflected in your GST/QST calculations. Bad debt adjustments require specific tax treatment.

7. Analyze capital asset purchases
   Ensure capital asset invoices are properly recorded and that ITCs are claimed in accordance with GST/QST rules.

8. Verify accuracy of tax coding in your accounting system
   Check that products, services, and expense categories are correctly marked as taxable, exempt, or zero-rated.

9. Confirm year-end journal entries
   Ensure year-end entries such as accruals or prepaids do not distort GST/QST accounts. Adjust entries may need to exclude tax impact or include it correctly.

10. Review intercompany transactions
    Transactions between related companies must follow GST/QST rules. Ensure invoices include appropriate tax when required.

11. Prepare audit-ready documentation
    Create a year-end folder including:
    • sales summaries
    • expense invoices
    • reconciliation schedules
    • capital asset records
    • copies of all GST/QST returns filed
    • bank statements

12. Final review before filing
    Check all numbers for consistency with your financial statements. If GST/QST accounts appear unusually high or low, recheck documentation before filing.

MACKISEN STRATEGY

Mackisen CPA helps businesses complete detailed year-end GST/QST reconciliations. We review your tax accounts, verify invoices, recalculate totals, and ensure consistency with your financial statements. Our team identifies errors early, corrects misclassifications, and builds an audit-ready file that protects your business from reassessments.

For businesses behind on their bookkeeping, Mackisen provides cleanup, reconstruction, and formal documentation preparation. We also prepare GST/QST returns and handle communications with Revenue Québec when questions arise.

REAL CLIENT EXPERIENCE

A retail business discovered large variances in year-end GST/QST accounts due to misconfigured POS tax codes. Mackisen corrected the data, filed adjustments, and prevented a reassessment.

A consulting firm claimed ITCs without proper documentation. Revenue Québec withheld their refund. Mackisen rebuilt the documentation and successfully released the payment.

A construction company had inconsistent quarterly filings. Year-end reconciliation revealed several unrecorded tax adjustments. Mackisen corrected the entries and prepared an audit-proof year-end file.

COMMON QUESTIONS

What if year-end shows large discrepancies
Investigate immediately. Large discrepancies often indicate missing invoices or incorrect coding.

Can I still claim ITCs from earlier in the year
Yes, if within the allowed period and with proper documentation.

Do annual filers need this checklist
Absolutely. Annual filers are at highest risk because errors accumulate over a full year.

Should I reconcile monthly even if I focus on year-end
Yes. Monthly reconciliation makes the year-end process much faster and more accurate.

What if my year-end GST/QST accounts don’t match my financial statements
A CPA should review the discrepancies before filing.

WHY MACKISEN

With over 35 years of combined CPA expertise, Mackisen CPA Montreal ensures that your year-end GST/QST filings are accurate, compliant, and audit ready. Our structured approach helps you avoid delays, errors, and reassessments, ensuring a smooth tax season.