As part of your small business accounting, you are required to file the income tax return every year. Filing your sole proprietorship or partnership business income tax return in Canada is done on T1 income tax form. This is the same form used in filing personal income taxes. By completing and filing the form, you are declaring all your income, whether it is from a job or business.
You will need to gather all the papers that you need to start the process. They include:
- The business number
- Your social insurance number
- Business and professional income guide from Canada revenue agency
- Business records with totals for sales, business expenses and cost of goods sold.
Completing the form:
- Fill the first section, which is the identification section
- Fill form T2125: Statement of Business or Professional Activities. This will enable you to calculate the business income. This form is included with the income tax form.
- Get your business’s industry code from the appendix of Business and Professional Income Guide.
- Fill the income and expenses parts on form T2125. For a partnership, you should fill the sections of partner’s details and the section for claiming amounts deductible from your share of partnership income. The form contains information to assist in calculating business expenses. This includes charts on calculating the motor vehicle expenses to claim, sections for calculating capital cost allowance to claim and a section for calculating business- use -of -home expenses if your business is home based.
- On the section of Total Income on the T1 income tax return form, go to the subsection for self-employment income and fill in your gross or net business income, professional or commission income. Enter your other income such as employment income on the Total income section.
- Fill the rest of the T1 income tax return form.
Once the form is complete, double check for accuracy prior to filing. The income tax may be filed prior to June 15th, 2015 without penalty. Interest on unpaid taxes will accrue from April 30th, 2015.
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