The Canada Revenue Agency requires fishers to report all of their income, but also allows them to deduct expenses. Here is a look at the types of income that you need to report, how filing differs for sole proprietors and partners, and the two types of accounting methods.
Types of Fishing Income
Fishing income is any income that you earn catching shellfish, crustaceans or marine animals. In addition, you have to report amounts collected from grants, credits and rebates, as well as subsidies and compensation for destroyed property. If you are a salesperson who receives fishing income, you also have to report these amounts.
If you trade your fish for goods or services, you must report the fair market value (FMV) of the fish you traded as income. However, if you trade fish for business necessities, you can write off the FMV of the traded fish as a business expense.
Additionally, if you sell capital property, you may be required to report capital gains as income.
Deducting Tax at the Source
If you want to avoid owing tax when you file your income tax return, you can sign up to pay your tax in instalments during the year. If you owed more than $3000 in the last two years, you may be obligated by the CRA to make instalment payments.
Alternatively, you can also request the buyer of the fish to deduct tax at the source. To do so, fill out and submit Form TD3F, Fisher’s Election for Tax Deductions at Source.
Filing Returns for Sole Proprietorships and Partnerships
If you are a sole proprietor, complete all of the relevant sections of Form T2121, Statement of Fishing Activities. The amounts reflected on that form will be applied to line 14299 of your tax return (T1).
If you fish in a partnership, you should split the income and expenses you report with the other partner based on the share of the partnership that you own.
If you are required to file a partnership return, you need to transfer information from your partnership information return — Slip T5013 — to Form T2121. If you are not required to file a partnership information return, you must still share information about your partnership on Form T2121.
Cash or Accrual Accounting Methods
Whether you file your taxes as a sole proprietor or a partnership, you have the option of using either accrual or cash accounting methods.
Under the accrual method, you report income and expenses in the fiscal year they are incurred. Under the cash method, you report income when you actually receive it and expenses when you actually pay them. Essentially, under the former, you report income when the deal is final. In contrast, under the latter, you must wait until the cash is directly in your hand.
