Are you a service-based sole proprietor or non-incorporated business owner who earns business income? Then you'll need to know Form T2125.
Do I Have to Fill Out a T2125?
What’s the Difference Between Professional Income and Business Income?
What Form Do I Use for Business Taxes?
I’m Self-Employed and Received a T4A. How Do I Report This Income?
If you’re self-employed, a business client may provide a T4A form that reports the income they paid you in the previous year. You will need to include the income on your T2125. If you are using tax preparation software, enter the information in the T4A section, and indicate that you would like to include the income on your T2125. When you report the rest of your revenue, make sure to deduct the revenue that was included on your T4A so you don’t double report your income.
It’s important not to rely on your clients to keep a record of what they’ve paid you. Some clients will not send you a T4A, mainly if they are a consumer and not a business. It’s your responsibility to keep accurate records of things like gross and net income for your business in the previous year and enter it on Form T2125.
I Work Under Contract for a Client. Am I an Employee or Considered a Sole Proprietorship?
You Are Considered an Employee If…
You Are Considered a Sole Proprietorship If…
Do I Need to Fill Out Form T2125 for Income Earned Outside of Canada?
What If I Bartered Some of My Services? Do I Need to Include That Income on Form T2125?
Do I Include My Business Expenses on Form T2125?
How Do I Fill Out Form T2125?
PART 1: Identification
- Name
- Social Insurance Number (SIN)
- Business name, address, and business number (which is often the same as your GST/HST number)
- Identifying information about your business, such as your main product or service (e.g., graphic design, plumbing, etc.) and industry code
PART 2: Internet Business Activities
PART 3: Income Types and Cost of Goods Sold
- 3A, Business Income: Fill in this part only if you have business (not professional) income. You’ll also enter how much GST/HST you collected.
- 3B, Professional Income: Fill in this part only if you have professional income. If you just have business income, leave this part blank and fill in 3A. You’ll also enter how much GST/HST you collected.
- 3C, Gross Business or Professional Income: Use the adjusted gross totals you calculated in 3A or 3B, plus include any reserves deducted in the previous year and any other income.
- 3D, Cost of Goods Sold and Gross Profit: Here’s where you enter your business income and subtract expenses like inventory, wages, subcontracts, and other costs directly related to selling your goods or services (a.k.a. costs of goods sold).
PART 4: Net Income (Loss) Before Adjustments
PART 5: Your Net Income (Loss)
PART 6: Other Amounts Deductible From Your Share of the Net Partnership Income (Loss)
PART 7: Calculating Business-Use-Of-Home Expenses
PART 8: Details of Other Partners
PART 9: Details of Equity
How Do I File Form T2125?
deadlines for the tax season you’re filing
This post was updated in December 2024.
