2017 Self-employed Business, Professional, Commission, Farming, and Fishing Income - Amanda Upshall ...
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Self-employed Business, Professional, Commission, Farming, and Fishing Income 2017 This guide is only available in electronic format. T4002(E) Rev. 17
Is this guide for you?
Use this guide if you earned income as a: ■ If you are an AgriStability and AgriInvest participant in
Alberta, Ontario, Saskatchewan, or Prince Edward
■ sole proprietor (unincorporated, self-employed
Island, use Guide RC4060, Farming Income and the
individual) who is any of the following:
AgriStability and AgriInvest Programs.
– business person
■ If you are an AgriStability and AgriInvest participant in
– professional the rest of Canada, use Guide RC4408, Farming Income and
the AgriStability and AgriInvest Programs Harmonized Guide.
– commission sales person (this is different from an
employee who earns commission)
– farmer For fishers
– fisher
You can be a self-employed fisher and also a partner of one
■ partner of a: or more fishing partnerships. For instance, you may have
fished for groundfish by yourself and also have been in a
– partnership who is a business person
lobster-fishing partnership with your child.
– partnership who is a professional
Generally, we consider you to be a self-employed fisher if
– farming or fishing partnership all of the following applies to you:
It will help you calculate your self-employment income to ■ you participate in making a catch;
report on your 2017 income tax return.
■ you are not fishing for your own or another person’s
Though a trust may be considered an individual, this guide sport; and
is not for trusts. Do not use this guide if you are a trust or
■ you meet at least one of the following conditions:
a corporation.
– you own or lease the boat that is used to make
If you are a trust, use Guide T4013, T3 – Trust Guide.
the catch
If your business is incorporated, use Guide T4012, T2
– you own or lease specialized fishing gear used to make
Corporation – Income Tax Guide.
the catch (not including hand tools or clothing)
This guide contains tax information for all types of
– you hold a species licence issued by Fisheries and
self-employment business income. However, some tax rules
Oceans Canada, which is necessary to make the catch
are not the same for all types of business. In this document,
you will find icons. – you have a right of ownership to all or part of the
proceeds from the sale of the catch, and you are
The briefcase icon means the information is specific to responsible for all or part of the expenses incurred in
business and professional income and Form T2125, making the catch. This means you have to pay a
Statement of Business or Professional Activities. predetermined amount or percentage of the expenses,
such as fuel, had by the crew in making the catch,
The tractor icon means the information is specific to regardless of the value of the catch.
farming and Form T2042, Statement of Farming Activities.
The fish icon means the information is specific to fishing
and Form T2121, Statement of Fishing Activities. You are considered to be self-employed if you have a
business relationship with a payer and you have the right
to determine where, when, and how your work is done. For
For farmers more information, see Guide RC4110, Employee or
Self-Employed?
If you are participating in the AgriStability and AgriInvest
programs, you have to use the applicable guide: Throughout this guide, we refer to other publications such
as guides and forms. Generally, if you need any of these, go
■ If you are an AgriStability and AgriInvest participant in to canada.ca/cra-forms. You may want to bookmark this
Quebec, use this guide for your income tax return and address for easier access to our website in the future. For
contact La Financière agricole du Québec more information on archived content of interpretation
at 1-800-749-3646 about AgriStability and bulletins, go to canada.ca/en/revenue-agency/services/
AgriInvest participation. forms-publications/what-archived-content-notice-means-
interpretation-bulletins.html.
canada.ca/taxesWhat’s new for 2017?
Billed-basis accounting for ■ for each subsequent taxation year, the full amount of the
lesser of the cost and the fair market value of
professionals work-in-progress will be taken into account for the
For taxation years that begin after March 21, 2017, a purposes of valuing that inventory
taxpayer carrying on a designated professional business
cannot use billed-basis accounting. Using billed-basis Guide T4003, Farming and Fishing
accounting means you exclude amounts for work in Income
progress at the end of a tax year from your business income
Guide T4003, Farming and Fishing Income, is no longer
for that year.
published. It was replaced by this guide. This guide now
A designated professional business means a business that is includes tax information for farmers, fishers, and all other
the professional practice of an accountant, dentist, lawyer types of self-employment income.
(including a notary in the province of Quebec), medical
doctor, veterinarian, or chiropractor. The taxpayer carrying Eligible capital property
on the designated professional business may be a
corporation or an individual practising alone or as a On January 1, 2017, the eligible capital property system was
member of a partnership. replaced with the new capital cost allowance (CCA)
class 14.1 with transitional rules. Under the old system,
If you elected to use billed-basis accounting in your last eligible capital expenditures are added to the cumulative
taxation year that begins before March 22, 2017, the eligible capital pool at a 75% inclusion rate, and the rate of
inclusion of work in progress into your income is phased in depreciation of those expenditures is 7% on a
as follows: declining-balance basis. Under the new system,
■ for your first taxation year that begins after newly-acquired eligible properties will be included in
March 21, 2017, 20% of the lesser of the cost and the fair class 14.1 at a 100% inclusion rate with a 5% capital cost
market value of work in progress will be taken into allowance rate on a declining-balance basis.
account for the purposes of determining the value of For each taxation year that ends before 2027, additional
inventory held by the business under the Income Tax Act deductions for CCA will be allowed for property acquired
■ for your second taxation year that begins after before January 1, 2017. This property will be included in
March 21, 2017, 40% of the lesser of the cost and the fair class 14.1.
market value of work in progress will be taken into
account for the purposes of determining the value of Investment tax credit for child care
that inventory
spaces
■ for your third taxation year that begins after Budget 2017 has eliminated the investment tax credit for
March 21, 2017, 60% of the lesser of the cost and the fair child care spaces. This measure will apply to expenditures
market value of work in progress will be taken into incurred on or after March 21, 2017. For more information,
account for the purposes of determining the value of see page 14.
that inventory
■ for your fourth taxation year that begins after
March 21, 2017, 80% of the lesser of the cost and the fair
market value of work in progress will be taken into
account for the purposes of determining the value of
that inventory
If you are blind or partially sighted, you can get our publications
in braille, large print, etext, or MP3 by going
to canada.ca/cra-multiple-formats. You can also get our
publications and your personalized correspondence in these
formats by calling 1-800-959-5525.
Unless otherwise noted, all legislative references are to the Income Tax Act and the Income Tax Regulations.
This guide uses plain language to explain the most common tax situations. It is provided for information only and does not
replace the law. If you need help after you read this guide, call our Business Enquiries line at 1-800-959-5525.
La version française de ce guide est intitulée Revenus d’un travail indépendant d’entreprise, de profession libérale, de commissions,
d’agriculture et de pêche.
canada.ca/taxesTable of contents
Page Page
Chapter 1 – General information ..................................... 6 Chapter 4 – Capital cost allowance .................................. 49
Reporting income and penalties ........................................ 7 What is capital cost allowance? .......................................... 49
How to report your self-employment income................. 7 Available-for-use rules ......................................................... 49
Business records ................................................................... 8 How much CCA you can claim .......................................... 49
Instalment payment ............................................................. 11 How to calculate your CCA ................................................ 50
Dates to remember ............................................................... 11 Classes of depreciable property ......................................... 53
Employment insurance (EI) premiums ............................ 12 Special situations ................................................................... 57
Goods and services tax/harmonized sales
Chapter 5 – Eligible capital expenditures ....................... 62
tax (GST/HST) .................................................................. 12
What is a partnership? ......................................................... 12 Chapter 6 – Losses ................................................................ 63
Non-capital losses ................................................................. 65
Chapter 2 – Income.............................................................. 15
Sole proprietorships ............................................................. 15 Chapter 7 – Capital gains ................................................... 65
Partnerships........................................................................... 15 How to calculate your capital gain or loss........................ 67
How to fill in Form T2125, Form T2042, or Other special rules ................................................................ 71
Form T2121 ........................................................................ 15 Information reporting of tax avoidance transactions ..... 71
Part 1 – Identification ........................................................... 16
Part 2 – Internet business activities ................................... 16 Capital cost allowance (CCA) rates .................................. 72
Part 3 – Income ..................................................................... 17 How to calculate the mandatory inventory
Chapter 3 – Expenses .......................................................... 26 adjustment (MIA)............................................................. 73
Current or capital expenses ................................................ 26 GST/HST ........................................................................... 74
Part 4 – Net income (loss) before adjustments ................ 27
GST/HST input tax credits ................................................. 37 Appendix – Industry codes ................................................ 77
Keeping motor vehicle records .......................................... 38 Online services ..................................................................... 81
Part 5 – Your net income (loss) .......................................... 47
Part 8 – Details of other partners ....................................... 48 For more information .......................................................... 83
Part 9 – Details of equity ..................................................... 48
4 canada.ca/taxesCapital cost allowance (CCA) – you may have acquired
Definitions depreciable property like a building, furniture, or
equipment to use in your business. You cannot deduct the
Arm’s length – refers to a relationship or a transaction
initial cost of these properties in the calculation of the net
between persons who act in their separate interests. An
income of the business or professional activities of the year.
arm’s length transaction is generally a transaction that
However, since these properties wear out or become
reflects ordinary commercial dealings between parties
obsolete over time, you can deduct the cost over a period of
acting in their separate interests.
several years. This deduction is called CCA.
“Related persons” are not considered to deal with each
other at arm’s length. Related persons include individuals Depreciable property – the property on which you can
connected by blood relationship, marriage, common-law claim CCA. It is usually capital property from a business or
partnership or adoption (legal or in fact). A corporation and property. The capital cost can be written off as CCA over a
another person or two corporations may also be number of years. You usually group depreciable properties
related persons. into classes. Diggers, drills, and tools that cost $500 or more
belong in Class 8. You have to base your CCA claim on the
“Unrelated persons” may not be dealing with each other at rate assigned to each class of property.
arm’s length at a particular time. Each case will depend
upon its own facts. The following criteria will be Fair market value (FMV) – generally, the highest dollar
considered to determine whether parties to a transaction value you can get for your property in an open and
are not dealing at arm’s length: unrestricted market between an informed and willing
buyer and an informed and willing seller who are dealing
■ whether there is a common mind which directs the
at arm’s length with each other.
bargaining for the parties to a transaction;
Motor vehicle – an automotive vehicle designed or adapted
■ whether the parties to a transaction act in concert
for use on highways and streets. A motor vehicle does not
without separate interests; “acting in concert” means, for
include a trolley bus or a vehicle designed or adapted to be
example, that parties act with considerable
operated only on rails.
interdependence on a transaction of common interest; or
Non-arm’s length – generally refers to a relationship or
■ whether there is de facto control of one party by the other
transaction between persons who are related to each other.
because of, for example, advantage, authority
or influence. However, a non-arm’s length relationship might also exist
between unrelated individuals, partnerships or
For more information, see Income Tax Folio S1-F5-C1,
corporations, depending on the circumstances. For more
Related persons and dealing at arm’s length.
information, see the definition of “arm’s length.”
Available for use – generally, the earlier of:
Passenger vehicle – a motor vehicle designed or adapted
■ the time the property is first used by the claimant to primarily to carry people on highways and streets. It seats a
earn income driver and no more than eight passengers. Most cars,
■ the time the property is delivered or is made available station wagons, vans, and some pick-up trucks are
to the claimant and is capable of producing a saleable passenger vehicles. They are subject to the limits for CCA,
product or service interest, and leasing. A passenger vehicle does not include:
For more information, see “Available-for-use rules” ■ an ambulance
on page 49. ■ a clearly marked police or fire emergency
Capital cost – the amount on which you first claim capital response vehicle
cost allowance (CCA). The capital cost of a property is ■ a motor vehicle you bought to use more than 50% as a
usually the total of the following: taxi, a bus used in the business of transporting
■ the purchase price (not including the cost of land, which passengers, or a hearse used in a funeral business
is not depreciable) ■ a motor vehicle you bought to sell, rent, or lease in a
■ the part of your legal, accounting, engineering, motor vehicle sales, rental, or leasing business
installation, and other fees that relate to buying or ■ a motor vehicle (except a hearse) you bought to use in a
constructing the property (not including the part that funeral business to transport passengers
applies to land)
■ a van, pick-up truck, or similar vehicle that seats no more
■ the cost of any additions or improvements you made to than the driver and two passengers and that, in the tax
the property after you acquired it, if you did not claim year you bought or leased it, was used more than 50% to
these costs as a current expense (such as modifications to transport goods and equipment to earn income
accommodate persons with disabilities)
■ a van, pick-up truck, or similar vehicle that, in the tax
■ for a building, soft costs (such as interest, legal and year you bought or leased it, was used 90% or more to
accounting fees, and property taxes) related to the period transport goods, equipment, or passengers to
you are constructing, renovating, or altering the building, earn income
if these expenses have not been deducted as
current expenses ■ a pick-up truck that, in the tax year you bought or leased
it, was used more than 50% to transport goods,
canada.ca/taxes 5equipment, or passengers to earn or produce income at a Note
remote work location or at a special work site that is at A reserve is the amount of gift cards or certificates that
least 30 kilometres from the nearest community with a you predict will be redeemed after the end of your fiscal
population of at least 40,000 year. When it’s deducted against the business income it
must be added back to the next year’s business income.
■ a clearly marked emergency medical service vehicle used
You can choose to calculate it or not.
to carry paramedics and their emergency
medical equipment ■ do not collect the GST/HST when you sell a gift card
or certificate
Proceeds of disposition – the amounts you receive, or that
we consider you to have received, when you dispose of ■ calculate the GST/HST when a customer uses their gift
your property (usually the selling price of the property). card or certificate as a payment method for a product or
Proceeds of disposition is also defined to include, amongst service they buy
other things, compensation received for property that has
■ calculate the GST/HST on the total price of the item
been expropriated, destroyed, or stolen.
or service
Undepreciated capital cost (UCC) – generally, the amount
■ deduct the amount that is on the gift card or certificate
left after you deduct CCA from the capital cost of a
from the amount of the purchase
depreciable property. Each year, the CCA you claim
reduces the UCC of the property. For more information on gift certificates, see the
Publication P-202, Gift Certificates, or call 1-800-959-5525.
Chapter 1 – General information If you filed your return and did not report the income from
gift cards or certificates, you can still change the
A business and business income information on your return. To find out how to change
your return, go to canada.ca/change-tax-return.
A business is an activity that you intend to carry on for
profit and there is evidence to support that intention. To change the information on your return online, go to My
Account at canada.ca/my-cra-account.
A business includes:
For more information about the Voluntary Disclosure
■ a profession Program, go to canada.ca/taxes-voluntary-disclosures.
■ a calling
■ a trade
Farming and fishing income
■ a manufacture
You can earn farming or fishing income as a self-employed
■ an undertaking of any kind farmer, fisher, or both, or as a partner of a farm or fishing
■ an adventure or concern in the nature of trade partnership, or both. Most of the rules that apply to
self-employed farmers or fishers also apply to partners.
For more information, see Interpretation Bulletin IT-459, However, if you are a partner, you should see “Reporting
Adventure or Concern in the Nature of Trade. partnership income” on page 13.
In this guide and for other reporting purposes, we treat
professional activities as a separate business category. Farming income
If any of your income earning business activities takes place Farming income includes income you earned from the
on a reserve, some of your business income might be following activities:
exempt from tax. For more information, go
to canada.ca/en/revenue-agency/services/ ■ soil tilling
aboriginal-peoples/information-indians.html#hdng5. ■ livestock raising or showing
Business income includes income from any activity you do ■ racehorse maintenance
for profit. For example, the income from a service business
is business income. ■ poultry raising
■ dairy farming
Gift cards or certificates
■ fur farming
Gift cards or certificates could be cards, vouchers, receipts,
tickets that have a monetary value. They are an alternative ■ tree farming
to paying cash for goods and services. ■ fruit growing
When you sell a gift card or certificate: ■ beekeeping
■ you must report the amounts you receive from the sale ■ cultivating crops in water or hydroponics
on the day they were sold as business income
■ Christmas tree growing
■ you may choose to calculate what we call a “reserve” as a
deduction against this income ■ operating a wild-game reserve
6 canada.ca/taxes■ operating a chicken hatchery For more information about penalties, go
to canada.ca/penalty-information-returns.
■ operating a feedlot
In certain circumstances, you may also earn farming When you must start reporting income and
income from: can start deducting expenses
■ raising fish You must start reporting your income and can start
deducting your expenses when your business starts. We
■ market gardening
look at each case on its own merits. Generally, we consider
■ operating a nursery or greenhouse your business to have started whenever you begin some
significant activity that is a regular part of the business, or
■ operating a maple sugar bush (includes the activity of
that is necessary to get the business going.
maple sap transformation into maple products if this
activity is considered incidental to the basic activities of Suppose you do research on how to start a business in the
a maple sugar bush, such as the extraction and the hope of going into a business of some kind. We would not
collection of maple sap, which are farming activities) consider that as a significant activity that is a regular part of
the business. So we would not consider your business to
Generally, livestock are domestic animals bred, raised, or
have begun at the time you started doing research. In that
kept on a farm or ranch, normally in an agricultural setting,
case, you cannot deduct any of the costs you have incurred
for commercial profit. They may also be used in the
for research.
production of commodities such as food, fiber, and labour.
For more information, see Interpretation Bulletin IT-427R, Suppose you decide to buy enough goods for resale or
Livestock of Farmers. equipment to start your business. We would consider this
to be the starting point of your business. You can usually
The raising or breeding of animals, fish, insects or any other
deduct all the expenses you incur for the business from that
living thing, to be sold as pets is not a farming activity. It is
point on to earn income. You could still deduct the
considered a business activity and must be reported as
expenses even if, despite all your efforts, your
business income on Form T2125, Statement of Business or
business ended.
Professional Activities.
For more information about the start of a business, see
Generally, farming income does not include income you
Interpretation Bulletin IT-364, Commencement of
earned from working as an employee in a farming business,
Business Operations.
from trapping or from sharecropping. For more
information on sharecropping arrangements, see Income Statistics Canada is allowed by law to get business
Tax Folio S4-F11-C1, Meaning of Farming and information collected by the Canada Revenue
Farming Business. For partnerships or joint ventures, see Agency (CRA). Statistics Canada can share the data with
Income Tax Folio S4-F16-C1, What is a partnership? provincial statistical agencies to use for research and
analysis purposes only. The data is related to business
activities carried on in their respective province.
Fishing income
How to report your self-employment
Fishing income includes income you earned, whether it was income
payable in cash, property, or services from fishing for
or catching: Fiscal period
■ shellfish Report your income based on a fiscal period. A fiscal
period is the time between the day your business starts its
■ crustaceans business year and the day it ends its business year. For an
existing business, the fiscal period is usually 12 months. A
■ marine animals
fiscal period cannot be longer than 12 months. However, it
Fishing income does not include income you earned from can be shorter than 12 months in some cases, such as when
working as an employee in a fishing business. a new business starts or when a business stops.
Self-employed individuals generally have to use a
December 31 year-end. If you are an eligible individual,
you may be able to use another method of reporting
Reporting income and penalties business income that allows you to have a fiscal period that
Include all your income when you calculate it for tax does not end on December 31. If your fiscal year-end is not
purposes. If you fail to report all your income, you may pay December 31, see Guide RC4015, Reconciliation of Business
a penalty of 10% of the amount you failed to report after Income for Tax Purposes, to calculate the amount of business
your first omission. income to report on your 2017 income tax return. The
A different penalty may apply if you knowingly, or under RC4015 will help you fill in Form T1139, Reconciliation
circumstances amounting to gross negligence, participate in of 2017 Business Income for Tax Purposes.
the making of a false statement or omission on your income If you filed Form T1139 with your 2016 income tax
tax return. The penalty is 50% of the tax attributable to the return, generally you have to file one again for 2017.
omission or false statement (minimum $100).
canada.ca/taxes 7Reporting methods When you calculate your income using the accrual method,
Farmers, fishers, and self-employed commission agents can the value of all inventories, such as livestock, crops, feed,
use the cash method or the accrual method to report fertilizer, fish, fish by-products, supplies, and so on will
income. All other self-employment income must be form part of the calculation. Make a list of your inventory
reported using the accrual method. and count it at the end of your fiscal period. Keep this list
as part of your business records.
Note for professionals You can use one of the following methods to value
If you currently carry on a designated professional your inventory:
business and use billed-basis accounting, the billed-basis
accounting method has changed. For more information, ■ Value all inventory at its fair market value (FMV) (see
see “Billed-basis accounting for professionals” on page 3 “Definitions” on page 5). Use either the price you would
and changes to the “Election to exclude your WIP” on pay to replace an item or the amount you would get if
page 18. you sold an item.
■ Value individual items at cost or FMV, whichever is less.
Cash method You can value items by group when you cannot easily
When you use the cash method you must: tell one item from another. Cost is the price you incur for
■ report income in the fiscal period you receive it an item, plus any expenses to get it to your business
location and put in a condition of use for your business.
■ deduct expenses in the fiscal period you pay them
■ For farmers, value livestock according to the unit price
For special rules, see “Prepaid expenses” on page 27. base. For this method, fill in Form T2034, Election to
If you use the cash method and receive a post-dated cheque Establish Inventory Unit Prices for Animals.
as security for a debt, include the amount in income when Use the same method you used in past years to value your
the cheque is payable. inventory. The value of your inventory at the start of
If you receive a post-dated cheque as an absolute payment your 2017 fiscal period is the same as the value at the end of
for a debt and the cheque is payable before the debt is due, your 2016 fiscal period. In your first year of operating a
include the amount in your income on one of the following business, you will not have an opening inventory at the
dates, whichever is earlier: start of your fiscal period.
■ the date the debt is payable For more information on inventories, see Interpretation
Bulletin IT-473R, Inventory Valuation.
■ the date you cash or deposit the cheque
Note for farmers and fishers
Note If you use the accrual method to calculate your farming
The post-dated cheque rules apply to income-producing or fishing income, calculate your cost of goods sold on a
transactions, such as the sale of grain or fish. They do not separate piece of paper. Form T2042 or Form T2121 does
apply to transactions involving capital property, such as not have a line to calculate this amount.
the sale of a tractor or boat.
When you use the cash method, do not include inventory Changing your method of reporting income
when you calculate your income. There are, however, two If you decide to change your method of reporting income
exceptions to this rule. from the accrual method to the cash method, use the cash
method when you file your next income tax return. Make
For more information on the cash method for farming or
sure you include a statement that shows each adjustment
fishing income and the exceptions, see Income Tax
made to your income and expenses because of the
Folio S4-F11-C1, Meaning of Farming and Farming Business.
difference in methods.
Note for farmers If you decide to change from the cash method to the
For more information, see “Line 9941 – Optional accrual method:
inventory adjustment included in 2017” on page 44 and
“Line 9942 – Mandatory inventory adjustment included ■ get permission from your tax services office
in 2017” on page 44. ■ ask for this change in writing before the date you have to
file your income tax return
Accrual method
When you use the accrual method you must: ■ explain why you want to change methods in your letter
■ report income in the fiscal period you earn it, no matter The cash and accrual methods are different. The first time
when you receive it you file your income tax return using the accrual method,
make sure you include a statement that shows each
■ deduct expenses in the fiscal period you incur them, adjustment made to your income and expenses.
whether or not you pay them in that period
Incur usually means you either paid or will have to pay Business records
the expense. You are required by law to keep records of all your
For special rules, see “Prepaid expenses” on page 27. transactions to be able to support your income and
expense claims. A record is defined to include an account,
8 canada.ca/taxesan agreement, a book, a chart or table, a diagram, a form, an Consequences of not keeping
image, an invoice, a letter, a map, a memorandum, a plan, a adequate records
return, a statement, a telegram, a voucher, and any other
If you do not keep the necessary information and you do
proof containing information, whether in writing or in any
not have any other proof, we may have to determine your
other form.
income using other methods.
Keep a record of your daily income and expenses. We do
We may also disallow expenses you deducted if you are
not issue record books nor suggest any type of book or set
unable to support them.
of books. There are many record books and bookkeeping
systems available; you can use a book that has columns and There are penalties for not keeping adequate records,
separate pages for income and expenses. for not giving the CRA access to your records when
requested, and for not giving information to CRA
Keep your duplicate deposit slips, bank statements, and
officials when asked.
cancelled cheques. Keep separate records for each business
you run. If you want to keep computerized records, make
sure they are clear and easy to read. Income records
Keep track of the gross income your business earns. Gross
Note
income is your total income before you deduct any
Do not send your records with your income tax return.
expenses, including those related to the goods sold. Your
However, do keep them in case we ask to see them at a
income records must include the date, amount, and source
later date.
of the income.
Benefits of keeping complete and Record the income whether you received cash, property, or
organized records services. Support all income entries with original
documents. Original documents include:
You can benefit from keeping complete and organized
records. For example: ■ sales invoices
■ When you earn income from many places, good records ■ cash register tapes
help you identify the source of income. If you keep
■ receipts
proper records, you may be able to prove that some
income is not from your business, or that it is not taxable. ■ bank deposit slips
■ Keeping good records will remind you of expenses you ■ fee statements
can deduct when it is time to do your income tax return.
■ contracts
■ Good records will keep you better informed about the
past and present financial position of your business. Original documents for farming include sales invoices,
cash register tapes, receipts, cash purchase tickets from the
■ Good records can help you budget, spot trends in your sale of grain, and cheque stubs from marketing boards.
business, and get loans from banks and other lenders.
Original documents for fishing include sales slips for
■ Good records can prevent problems you may run into if
we audit your income tax returns. each landing, trip settlement sheets, and slips or records of
sale to the public, retailers, and restaurants.
Example
The following sales journal is an example of how to record your income for one month. The provincial sales tax (PST) rate
for Manitoba is 8% and the goods and services tax (GST) rate is 5%:
Cash Credit Sales Total GST PST Payment on
Date Particulars sales sales returns sales (5%) (8%) account
(1) * (2) * (3) * (4) * (5) ** (6) ** (7)
1 July 1 Daily sales 146.00 27.00 173.00 8.65 13.84 10.00
2 July 2 Daily sales 167.00 36.25 26.00 177.25 8.86 14.18
3 July 3 Daily sales 155.02 19.95 10.01 164.96 8.25 13.20 32.40
4 July 4 Daily sales 147.00 29.95 176.95 8.85 14.16
* GST and PST or HST is not included.
** If you sell to a resident in one of the participating provinces, the HST replaces the GST and the PST.
In this example on July 1, you add up the sales invoices and cash register tapes. You find that you had cash sales of $146 and
sales on account of $27. In your sales journal, you record the cash sales in column 1 and the credit sales in column 2.
No merchandise was returned on July 1, so you leave column 3 blank.
In column 4, enter the total of your cash sales and your credit sales, minus merchandise returned for that day.
In columns 5 and 6, enter the total of GST and PST you charged on your sales.
canada.ca/taxes 9In column 7, keep track of cash payments received for previous credit sales. Do not include these payments in the daily
sales figures.
Expense records Q. What should I do if a supplier does not want to give
me a receipt?
Always get receipts or other vouchers when you buy
something for your business. The receipts have to show A. When you buy something, make sure you get a receipt.
the following: Suppliers who are GST/HST registrants are required to
provide receipts. Farmers or fishers must obtain
■ the date of the purchase documentation to support the transactions they enter
■ the name and address of the seller or supplier in their books and records. Your transactions may be
denied if you do not have the proper documentation to
■ the name and address of the buyer support your purchases. For more information,
■ the full description of the goods or services see Guide RC4022, General Information for
GST/HST Registrants.
■ the vendor’s business number if they are a
GST/HST registrant Keep a record of the properties you bought and sold. This
record should show who sold you the property, the cost,
You were asking? and the date you bought it. This information will help you
Q. What should I do if there is no description on a receipt? calculate your CCA and other amounts. Chapter 4 explains
how to calculate CCA.
A. When you buy something, make sure the seller
describes the item. However, sometimes there is no If you sell or trade a property, show the date you sold or
description on the receipt, as with a cash register tape. traded it and the amount of the payment or credit from the
In this case, you should write what the item is on the sale or trade-in.
receipt or in your expense records.
Example
The following expense journal is an example of how to record your expenses for one month:
Date Particulars Cheque GST Legal & Capital
Bank Purchases Adv. Permit Repairs
No. (5%) Acct. items
July 1 XYZ Radio 407 367.50 17.50 350.00
July 1 Smith Hardware
408 26.95 1.28 25.67
July 2 City of Ottawa 409 157.50 7.50 150.00
July 3 Andy’s
410 262.50 12.50 250.00
Accounting
July 5 Wholesale
411 1,836.60 87.46 1,749.14
Supply Inc.
July 5 Ed’s Used Cars 412 1,575.00 75.00 1,500.00
Example of how to record fishing expenses
Summary Sheet for a Fishing Boat – Fishing on a Share Basis
Gross Boat Captain’s Crewman Crewman Crewman Crewman
Date Oil Bait Ice Food Totals
stock share commission No.1 No.2 No.3 No.4
February 14 $10,000 $4,000 $300 $400 $200 $300 $200 $1,150 $1,150 $1,150 $1,150 $10,000
March 10 30,000 12,000 300 400 200 300 600 4,050 4,050 4,050 4,050 30,000
March 19 20,000 8,000 300 400 200 300 400 2,600 2,600 2,600 2,600 20,000
Totals
Summary Sheet for Boat and Other Expenses
Electrical Interest Nets, Other
Boat Engine Radar
Date To whom paid equipment Insurance on traps, Wages
repairs repairs rental Description Amount
repairs loan twine
January 19 Shipyard $1,500 $900
February 3 X Suppliers Ltd. $600
March 31 Rental services $800
March 31 Fishermen’s loan $2,250 $945
April 4 L. Electronics $85
April 12 B. Garage Car repairs $75
May 2 J.G. Smith $120
May 16 L. Electronics Sounder 3,000
Totals
10 canada.ca/taxesSummary Sheet for Sales Other Than From Fishing on a Share Basis
Gross Deducted from sales proceeds
Date To whom sold Net cash received
landings Gas Bait Other
January 16 Fish Packers $1,000 $36.50 $74.90 $20 $868.60
20 Fish Packers 800 20.00 36.00 10 734.00
21 J. Restaurant – no fish slip 100 100.00
25 Fish Packers 940 32.00 56.00 12 840.00
Totals
Summary Sheet for Expenses (other than those deducted on fish slips)
Motor Materials, Other
Boat Engine Wages Gas for
Date To whom paid Bait Rope vehicle traps,
repairs repairs paid boat Description Amount
expenses nets
January 4 X Suppliers $25 $85
5 Shipyard $300
7 Provincial gov. Fishing Licence $7
7 B. Insurance $280
9 X. Service Station 16
12 F. Jones $85
31 Fishermen’s loan Interest 175
Totals
Use the totals to fill in Form T2121, Statement of Fishing Activities.
For more information on how to keep your business Note
records, the time limits, and to learn more about the If any of the dates mentioned above fall on a Saturday, a
benefits of keeping them complete and organized, go Sunday, or a statutory holiday, you have until the next
to canada.ca/taxes-records. business day to make your instalment payments.
Instalment payment Dates to remember
As a self-employed individual, you may have to pay an February 28, 2018 – If you have employees, file your 2017
instalment payment. In most cases, we will send you an T4 Summary and T4A Summary. Also, give your employees
instalment reminder showing an instalment amount we their copies of the T4 and T4A slips.
have calculated for you.
March 15, 2018 – Make your first 2018 instalment
You can view your instalment reminders using one of payment if you earn business, professional, or
the following: commission income.
■ My Account at canada.ca/my-cra-account
March 31, 2018 – Most partnerships with individuals as
■ My Business Account partners file a partnership information return. However,
at canada.ca/my-cra-business-account there are exceptions, see Guide T4068, Guide for the
Partnership Information Return (T5013 Forms).
If you earn farming and fishing income, instalment
payments are due December 31. April 30, 2018 – Pay any balance owing for 2017. Also, file
your 2017 income tax return if the expenditures of your
If you earn business, professional, or commission business are mainly the cost or the capital cost (see
income, instalment payments are due March 15, June 15, “Definitions” on page 5) of tax shelter investments.
September 15, and December 15.
June 15, 2018 – File your 2017 income tax return if you have
There are different methods you can use to calculate self-employment income, or if you are the spouse or
instalment payments. For example, you can use the common-law partner of someone who does, unless your
Instalment payment calculator service at My Business business expenditures are mainly the cost or the capital cost
Account to calculate them and view their due dates. of tax shelter investments. Remember to pay any balance
Go to one of the following: owing due by April 30, 2018, to avoid interest charges.
■ canada.ca/my-cra-business-account, if you are a June 15, 2018 – Make your second 2018 instalment
business owner payment by this date if you earn business, professional, or
■ canada.ca/taxes-representatives, if you are an authorized commission income.
representative or employee June 30, 2018 or the period end date plus 6 months – If
You may have to pay interest and a penalty if you do not your business is in the construction industry and hires
pay the full instalment amount you owed on time. subcontractors, you may have to file a
2017 T5018 information return, that consists of
For more information on instalment payments and
Form T5018SUM, Summary of Contract Payments, and the
instalment interest charges, go
related T5018 slips, to report your payments.
to canada.ca/taxes-instalments.
canada.ca/taxes 11For more information, property and services (including those taxable at 0%) and
go to canada.ca/contract-payment-reporting-system and those of your associates are more than $30,000 in a single
choose the topic entitled “Construction industry (T5018).” calendar quarter or over four consecutive calendar
quarters. Taxable supplies of property and services include
September 15, 2018 – Make your third 2018 instalment those that are subject to GST/HST at the applicable rate,
payment by this date if you earn business, professional, or those that are taxed at 0% (zero-rated), and those from all
commission income. your associates.
December 15, 2018 – Make your fourth 2018 instalment Do not include in your calculation any revenues from sales
payment by this date if you earn business, professional, or of capital property, supplies of financial services, and
commission income. goodwill from the sale of a business.
December 31, 2018 – Pay your instalment payment if If you provide care and supervision in your home to
you meet the following conditions: children 14 years of age or under for periods of usually less
than 24 hours per day, your daycare service is exempt from
■ your main source of income in 2018 is self-employment GST/HST. If this is the case, you cannot add this tax to the
income from farming or fishing amount you charge customers for these services. For more
■ your net tax owing is more than $3,000 in each of 2016, information, see Guide RC4022, General Information for
2017, and 2018 ($1,800 if you live in Quebec on GST/HST Registrants.
December 31 for any of those years)
For more information about GST/HST taxable farm
For more information on paying your income tax by or fishing goods and services, zero-rated farm or fishing
instalments, go to canada.ca/taxes-instalments. products, and zero-rated farm or fishing purchases, see
Note page 74.
If any of the dates mentioned above fall on a Saturday, For more general information on GST/HST, go
Sunday, or a statutory holiday, you have until the next to canada.ca/gst-hst or see the GST/HST Memoranda
business day to file your return or make your payment. Series 2-1, Required registration.
Employment insurance (EI) premiums The GST/HST Registry
As a self-employed individual you may be eligible to The GST/HST Registry is an online service you can use to
contribute to Employment insurance (EI) for yourself. You confirm the GST/HST number of a business. You can use
may register to participate if you meet the eligibility criteria this registry to check if your suppliers are registered for the
defined by Service Canada. GST/HST when you claim an input tax credit. For more
information, go to canada.ca/gst-hst-registry.
Beginning in the year you register, your EI premiums will
be calculated on your income tax return for that year. If you You can check the Quebec Sales Tax (QST) registration
register in 2017 to participate in this program, premiums number at revenuquebec.ca/en/sepf/services/
for 2017 will be calculated on your 2017 income tax return sgp_validation_tvq/default.aspx.
and will be payable by April 30, 2018.
Subsequently, if you pay your income tax by instalments, What is a partnership?
EI premiums may be included in your A partnership is defined as the relationship that exists
instalment payments. between persons carrying on a business in common with a
When you register for the EI program, EI premiums will be view to profit. You can have a partnership without a
payable on your self-employment income for the entire written agreement. To help you decide if you are a partner
year, regardless of the date you register. For example, in a certain business, determine the type and extent of your
whether you register in April 2017 or December 2017, you involvement in the business and check your province or
will pay EI premiums on your self-employment income for territory’s laws.
the entire 2017 year. When you form, change, or dissolve a relationship that may
EI premiums are payable on the amount of your be a partnership, consider:
self-employment earnings up to an annual maximum ■ whether the relationship is a partnership
amount. The annual maximum amount for 2017 is $51,300.
■ the special rules about capital gains or losses and
Claim your provincial or territorial non-refundable tax the recapture of CCA that apply when you
credit for the employment insurance premiums on the transfer properties to a partnership
provincial or territorial Form 428 at line 5829.
■ the special rules that apply when you dissolve
For more information, visit servicecanada.gc.ca. a partnership
■ the special rules that apply when you dispose of your
Goods and services tax/harmonized interest in a partnership
sales tax (GST/HST) For more information about partnerships, see Income tax
Generally, you must register for the GST/HST if your Folio S4-F16-C1, What is a Partnership? or Guide T4068,
worldwide gross revenues from your taxable supplies of Guide for the Partnership Information Return (T5013 Forms).
12 canada.ca/taxesLimited partnership from your business income in box 116 of the T5013 slip. Do
A limited partnership is composed of one or more general not deduct this amount again.
partners and one or more limited partners. For more information on CCA and the adjustments to
A general partner has unlimited liability for the debts and capital cost, see Chapter 4.
obligations of the partnership. Any recapture of CCA or terminal loss on the sale of a
A limited partner generally has limited liability for the partnership’s depreciable property is included in the
debts and obligations of the partnership unless the partner partnership’s income or loss for the year that is allocated to
is involved in running the business. the partners. Any taxable capital gain on the sale of a
partnership’s depreciable property is also allocated to
the partners.
Reporting partnership income
A partnership does not file an income tax return, and is not For more information about capital gains and losses, as well
taxed at the partnership level. All income and losses of a as recapture and terminal losses, see Chapter 4.
partnership flow through to the partners. They report their
share on their income tax returns such as their T1, T2, or T3. GST/HST rebate for partners
This requirement is the same whether their share of income If you are an individual who is a member of a partnership,
was received in cash or as a credit to the partner’s you may be able to get a rebate for the GST/HST you paid
capital account. For more information, see Guide T4068, on certain expenses. The rebate is based on the GST/HST
Guide for the Partnership Information Return (T5013 Forms). you paid on expenses you deducted from your share of the
partnership income on your income tax return. However,
Partnership losses special rules apply if your partnership paid you an
If a partnership has a loss from carrying on business in a allowance for those expenses.
taxation year, this loss is allocated to the partners. In As an individual who is a member of a partnership, you
general, the amount of business loss allocated to a may qualify for the GST/HST partner rebate if you meet
particular partner is either netted against the partner’s the following conditions:
income from other sources to arrive at net income for the
year or is included in determining the partner’s non-capital ■ the partnership is a GST/HST registrant
loss for the year, as the case may be. ■ you personally paid GST/HST on expenses that:
Note – you did not incur on behalf of the partnership
The loss carry forward period is 20 years for non-capital
losses, farm or fishing losses, restricted farm losses, – you deducted from your share of the partnership
and life insurer’s Canadian life investment income on your income tax return
losses incurred. However, special rules apply if the partnership reimbursed
you these costs.
Filing requirements for partnerships
Examples of expenses subject to the GST/HST are vehicle
Under subsection 229(1) of the Regulations, all partnerships costs and certain business-use-of-home expenses. The
that carry on business in Canada or are Canadian rebate may also apply to the GST/HST you paid on motor
partnerships or specified investment flow-through (SIFT) vehicles, musical instruments, and aircraft, for which you
partnerships must file a partnership return. However, deducted CCA.
under CRA administrative policy, certain partnerships that
carry on business in Canada or are Canadian partnerships The eligible part of the CCA is the part that you deduct on
are not required to file a partnership return. your tax return in the tax year that relates to a motor
vehicle, musical instrument, or aircraft on which you paid
For more information about the partnership information GST/HST and that is eligible for the rebate, to the extent
return and any other filing exemptions, see Guide T4068, that the partnership used the property to make
Guide for the Partnership Information Return (T5013 Forms). taxable supplies.
Capital cost allowance (CCA) You can also get a GST/HST rebate calculated on the CCA
you claimed on certain types of property. For example, you
A partnership can own depreciable property (see can claim CCA for a vehicle you bought to earn partnership
“Definitions” on page 5) and claim CCA on it. However, income if you paid GST/HST when you bought it.
individual partners cannot claim CCA on property the
partnership owns. If you deduct CCA on more than one property of the same
class, separate the part of the CCA that qualifies for the
From the capital cost of depreciable property, subtract any rebate from the CCA on the other property. If the rebate
investment tax credit allocated to the individual partners. relates to the CCA deduction for a motor vehicle, a musical
We consider this allocation to be made at the end of the instrument or an aircraft, you have to reduce the
partnership’s fiscal period. You must also reduce the capital undepreciated capital cost (UCC) of that property by the
cost by any type of government assistance received. amount that is part of the rebate.
Box 040 of your T5013 slip, Statement of Partnership
Income shows the amount of CCA the partnership claimed Fill in Form GST370, Employee and Partner GST/HST Rebate
on your behalf. This amount has already been deducted Application, to claim your GST/HST rebate for partners.
canada.ca/taxes 13You have to include this rebate in your income for the tax Investment tax credit (ITC)
year in which you receive it. An investment tax credit (ITC) lets you subtract part of the
Use the “Other amounts deductible from your share of net cost of some types of property you acquired or
partnership income (loss)” chart of Form T2125, Statement of expenditures you incurred from the taxes you owe. You
Business or Professional Activities, Form T2042, Statement of may be able to claim this tax credit in 2017 if you:
Farming Activities, or Form T2121, Statement of Fishing ■ acquired qualifying property
Activities, to claim expenses for which the partnership did
not reimburse you or any other deductible amounts. ■ incurred qualifying expenditures
For more information, see “Line 9943 – Other amounts ■ were allocated renounced Canadian
deductible from your share of net partnership income exploration expenses
(loss)” on page 47.
■ for farmers, acquired monies paid to agricultural
Note organizations through check-offs, levies or
Enter the amount of the GST/HST rebate for partners cash assistance
that relates to eligible expenses other than CCA at
You may also be able to claim this tax credit in 2017 if you
line 9974 of Form T2125, Form T2042, or Form T2121.
have unused ITCs from previous years.
Reduce the UCC for the beginning of 2018 by the portion
of the rebate that relates to the eligible CCA in Area A of
Atlantic Investment Tax Credit
the appropriate form.
The Atlantic Investment Tax Credit is based on specified
For more information about the GST/HST rebate, go to our percentages available for certain investments in new
webpage “GST/HST rebate for employees and partners.” buildings, and new machinery and equipment used in the
Atlantic Canada and Atlantic Region.
Example
Patrick is a partner in an Alberta partnership called Scientific research and experimental
ABC Contracting. The partnership is registered for development (SR&ED)
GST/HST and has a December 31 year-end. Under the You can receive scientific research and experimental
partnership agreement, Patrick is required to personally development (SR&ED) ITCs on qualified expenditures. You
pay his motor vehicle expenses. Patrick’s GST/HST fraction can receive them in the form of a cash refund or a reduction
is (5/105). of tax payable or both. Unused SR&ED ITCs can be carried
back three years or carried forward 20 years.
The following are his 2017 motor vehicle expenses. He did
not receive an allowance or reimbursement for Note for farmers
these expenses. Agricultural producers can access ITCs earned on
contributions made to agricultural organizations that
Total eligible expenses other than CCA .............. $ 3,150.84
fund SR&ED. For more information, see Chapter 8 of the
CCA ........................................................................... 5,100.00
Third-Party Payments Policy on the CRA website.
Total eligible expenses including CCA................ $ 8,250.84
Patrick calculates the GST/HST rebate for partners: Mineral exploration tax credit (METC)
$8,250.84 × (5/105) = $392.90 Certain renounced Canadian exploration expenses qualify
for this ITC. You must subtract the amount of any
The amount $392.90 is Patrick’s partner GST/HST allowable provincial tax credit.
rebate amount.
He files Form GST370, Employee and partner GST/HST rebate Apprenticeship job creation tax credit (AJCTC)
application, and includes $392.90 at line 457 on The apprenticeship job creation tax credit (AJCTC) is a
his 2017 tax return. non-refundable ITC. The amount of the credit is added to
the ITC and is available to reduce federal taxes payable for
Patrick calculates the GST/HST rebate for partners related
the tax year.
to his eligible expenses other than CCA:
$3,150.84 × (5/105) = $150.04 Investment tax credit for child care spaces
$150.04 is the GST/HST rebate for partners related to his As of March 22, 2017, you can no longer claim an
eligible expenses other than CCA. investment tax credit for the creation of child care spaces.
However, the investment tax credit will be available for
When filing his 2018 tax return, he will include this amount eligible expenses incurred before 2020 if you entered a
on line 9974 of Part 5 of his Form T2125, Form T2042, or written agreement before March 22, 2017.
Form T2121. Patrick also calculates the amount of the
GST/HST rebate for partners that relates to CCA: For more information about ITCs and to claim them, see
Form T2038(IND), Investment Tax Credit (Individuals).
$5,100 × (5/105) = $242.86
On his 2018 tax return, he will reduce the 2018 beginning
UCC of his motor vehicle by $242.86 in column 2 of Area A.
14 canada.ca/taxesYou can also read
