Transcript

Host: Welcome to the segment called Filing tax returns with business income, part of the Reporting Business Income and Expenses video.

I’m Kathleen Sinclair, your host for this segment. With me is Andrea Cohen. Welcome Andrea.

Subject matter expert: Thank you Kathleen.

Host: Does a small business owner have to file a different tax return to report their income and claim their deductions?

Subject matter expert: Generally, a sole proprietor or partner in a business would fill out Form T2125, Statement of Business or Professional Activities, and include this with their income tax and benefit return each year.

The gross and net income are calculated on Form T2125 and reported on the person’s income tax and benefit return each year.

This is on the second page of the return, in the section where you report your business income.

Host: Where do I find Form T2125, Statement of Business or Professional Activities?

Subject matter expert: Most tax preparation software packages that you buy, offer this form. The form is also available on the CRA's website.

Host: Is it complicated and difficult to fill out?

Subject matter expert: Not really. Let’s walk through it. It’s a step-by-step process.

On the first page of the statement of business activities, you fill in your business identification information and report your gross income. At the bottom of the page, the instructions tell you to report your gross income on line 162 of your income tax and benefit return.

On page two, you would deduct your cost of goods sold and all of your business expenses. At the bottom of this page, you are directed to report your net income on line 135 of your income tax and benefit return.

Host: That's all there is to it? Just those two pages?

Subject matter expert: Almost. There are a couple more pages provided to help you calculate some of the expenses you record on page 2, things like vehicle expenses, business-use-of-home expenses and capital expenses. You would only fill out the pages that apply to your situation. Let’s have a look at these pages as well.

Page 3 is where you record and calculate eligible business-use-of-home expenses.

Page 4 is provided if you need to calculate any capital expenses.

And finally, page 5 is where you record and calculate eligible vehicle expenses.

Host: Are these all the forms that a small business owner needs to file with the CRA?

Subject matter expert: There are other forms that may need to be submitted in addition to the business owner’s Income tax and benefit return.

If the business has to collect GST or HST, it needs to file a GST/HST return. For more information refer to the GST/HST Memoranda Series 2.1 for Required Registration. The link is included in the related links for this segment.

If the business has employees, there are more reporting requirements as well. For information on these requirements, go to the CRA’s webpage on payroll, www.cra.gc.ca/payroll or you can view the CRA’s Payroll information for a new small business video at www.cra.gc.ca/videogallery.

If, at the end of the fiscal period, the partnership has revenues plus expenses of more than $2 million, or has more than $5 million in assets, the partnership might have to file a T5013, Statement of Partnership Income. There are other situations where a partnership may also have to file a return. For more information, go to the CRA webpage on that topic. The link is included in the Related links for this segment.

Host: Thank you Andrea.

This concludes the segment called Filing tax returns with business income part of the CRA’s Reporting Business Income and Expenses video.

Thank you for watching.