Reporting Self-Employment Income

taxesSome of  the questions most often asked by new businesses is:  How do I calculate my taxes?  Am I taxed on gross income?  Do I have to file a separate return for my business and personal income?

So, here are some tips:

1.  Self-employed people and their spouses or common-law partners have until June 15th each year to file their tax returns.  However, any tax owing must still be paid by April 30th.  The income tax returns may be filed, if desired, using Canada Revenue Agency’s Netfile service.  There are several CRA-approved software packages which may be used to Netfile a return.  For more information on the Netfile process, visit the CRA website at

2.  If your business is not incorporated, then you only have to file a personal (T1) tax return.  The income or loss from the business will be included on your personal tax return.   With your personal tax return, you will have to file a “statement of business activities” which includes an income statement for your business.  If you have a loss from your business, and you have other income such as employment or investment income, then the business losses will reduce the other income on your tax return.  If you have business losses which exceed your other income in the current year, they  can be carried back, or carried forward to apply against income in other years.

3.  The Statement of Business and Professional Income is the form that you will used to report your income or loss.  The form T2125 can be found on the cra website.   Consult this form to help you properly classify your expenses.   Canada Revenue Agency (CRA) has a Business and Professional Income Guide (T4002) for unincorporated businesses, which provides help in completing the statement of business activities.

It can be very beneficial to seek the help of an accountant to set up your record-keeping when you first start your small business.  After that, even if you are able to do your own tax returns, having them reviewed by your accountant or tax advisor can often save you money and avoid problems.