Bank feed and automation errors: duplicates, wrong tax codes and unsupported input tax credits

Automated bookkeeping fails in predictable ways: duplicate transactions from overlapping feeds or imports, bank rules that apply the wrong account or sales tax code, payment processor deposits recorded as net instead of gross sales, transfers recorded as income or expense, and input tax credits claimed without the supporting information the CRA requires. None of these is visible until someone reviews the books, and each one flows straight into GST/HST returns and the financial statements. A short monthly review catches most of them and is far cheaper than a year-end clean-up or a CRA review.

This guide is part of the corporate accounting mistakes guide. For the costs and benefits of automation in general, see accounting automation costs.

The common errors

Error	How it happens	Effect	How to catch it
Duplicates	Feed reconnected, statement imported over an existing feed, two apps posting the same sale	Overstated income or expenses; double ITCs	Bank reconciliation does not balance; search for same amount and date
Rule miscoding	A rule built for one supplier also catches others	Wrong expense account; wrong tax code	Review rules quarterly; review exceptions
Wrong tax code	Default code applied to zero-rated, exempt or out-of-province purchases	Over- or under-claimed ITCs	Sales tax report by code each period
Net deposits	Processor payouts recorded after fees and refunds	Sales and fees understated; GST/HST on sales may be wrong	Use processor reports to gross up
Transfers as income	Moving money between accounts coded as sales	Overstated income and tax	Match transfers between accounts
Loan payments as expenses	Whole payment coded as interest or expense	Overstated expenses; wrong loan balance	Agree to the loan statement
Personal purchases	Personal card or personal items on the business card	Disallowed expenses; ITCs on personal items	Owner review of card statements
Foreign currency	Purchases in USD recorded at the wrong rate	Misstated expense and ITC	Check rate method in settings

Input tax credit documentation: the thresholds

To claim an input tax credit, a registrant needs supporting documentation with the information prescribed by the Input Tax Credit Information (GST/HST) Regulations. Section 3 of those regulations sets three levels based on the total amount paid or payable shown on the document:

Total on the invoice or receipt	Information level
Less than $100	The supplier's name (or business name), the invoice date (or the date the tax was paid or became payable) and the total amount paid or payable
$100 or more and less than $500	Adds the supplier's GST/HST registration number and either the tax charged or a statement that tax is included with the total tax rate
$500 or more	Adds the recipient's name, the terms of payment and a description of each supply

Check the regulations or the CRA's guidance for the exact list at each level. Receipt capture tools often read the amount and date correctly but miss or misread the registration number; for purchases of $100 or more, confirm it is present before relying on the credit. In Quebec, invoices also need the supplier's QST number to support input tax refunds.

Illustrative impact

Suppose a corporation claims $3,900 of ITCs in a year on purchases where receipt capture failed to record a registration number, and a CRA review finds no adequate documentation for $1,300 of them. The CRA can deny the $1,300, interest runs from the original due date, and the accountant spends, say, 4 hours at $130 = $520 gathering replacement invoices from suppliers. The replacement invoices may recover some of the credits, but the time is lost either way.

A monthly review routine (about an hour for a small corporation)

Reconcile each bank, card and processor account to the statement balance.
Scan for duplicates: sort by amount and date.
Review uncategorized and rule-coded items since last month.
Run the sales tax report by tax code and look for anything unusual, such as tax on items that should be zero-rated or no tax on taxable purchases.
Check receipts over $100 have a supplier registration number.
Agree loan and line of credit balances to lender statements.
Review owner transactions and update the shareholder loan account; see shareholder loans and personal expenses.
Lock the period in the software once reviewed, if the software allows it, so later edits cannot change filed figures without notice.

When an error has already been filed

GST/HST: small errors can often be corrected on a later return within the time limits; larger errors usually require an amended return for the period. Ask your accountant which applies.
T2: an amended return or a request for adjustment may be needed.
Voluntary disclosure: if the error resulted in underpaid tax and is significant, ask a professional whether the CRA's Voluntary Disclosures Program is appropriate. Eligibility conditions apply.

How automation errors affect your fees

Automation was supposed to reduce fees; errors reverse that. A year-end that requires removing duplicates and recoding hundreds of transactions can cost more than manual bookkeeping. The automation payback example shows a scenario where unreviewed automation wipes out the first-year saving. If someone else reviews monthly, the bookkeeping pricing guide explains how to price that work.

Errors that reach filed returns can lead to the penalties described in late-filing penalties for T2 and GST/HST, and the documents a reviewer will ask for are listed in CRA reviews and record retention.

Frequently asked questions

Should I disconnect bank feeds and import statements instead?

Feeds are usually more reliable than manual imports. Problems come from mixing the two or reconnecting feeds without checking for overlap.

Can I trust receipt capture to read the tax amount?

Usually, but not always. Review captured amounts against the receipt for larger purchases and anything with mixed taxable and zero-rated items.

Who is responsible if the bookkeeper's rules were wrong?

The corporation is responsible to the CRA for its returns. Between you and the bookkeeper, the engagement terms apply.

Sources

Justice Laws Website — Input Tax Credit Information (GST/HST) Regulations, SOR/91-45
Canada Revenue Agency — input tax credits, correcting GST/HST returns and the Voluntary Disclosures Program
Revenu Québec — QST input tax refunds and invoice requirements