Useful Information from R&D Tax & Accounting Services
Business Funds versus Trust Funds
Mary and Joe Brown own a computer business with 2 employees. Mary completes the bookkeeping and assists Joe as a computer tech. They opt to remit HST quarterly. Mary has minimal bookkeeping experience and completes the books once a quarter. Joe and Mary purchase computer inventory whenever necessary and make large shareholder withdrawals. At the end of the quarter, Mary realizes that they do not have the funds necessary to pay the Receiver General so she neglects to file the HST. The Receiver General sends the business a notice and Mary netfiles the first and second quarter. Mary realizes that due to the large inventory and shareholder withdrawals, the business does not have the funds to pay the trust monies (HST), interest and penalties.
In the above scenario, Mary and Joe are spending Trust Funds and placing their business in jeopardy.