Form T2042 – Statement of Farming Activities, allows you to report information about your farm to the Canada Revenue Agency. As a farmer, you will complete this form and attach it to your income tax return every year. Here is a look at what is included on form T2042, and a look at alternative forms.
Identification – Part 1
The top portion of form T2042 contains information about you and your farm. Make sure to include your program account number, a 15-character identifier created by the CRA, as well as your industry code. The CRA has different codes for everything from poultry hatcheries, to hog farms, to non-citrus fruit farms. (Type in “Farming” and you will get the list of various types of farming codes.)
If you have a website where you sell goods or even just advertise your wares, you need to report your web address as well. This is applied to Part 2 of the form.
Farming Income – Part 3
The next portion of form T2042 is reserved for reporting your farming income. The form has several lines for different types of income, so make sure that you keep detailed records so that you can enter everything correctly. For example, reporting income from eggs will be done on a different line than reporting income from dairy subsidies.
Drought and Income Deferral – Part 4
If you live in an area that was significantly affected by drought or flood, you can defer income from selling breeding livestock.
You are required to report the income in the year that your area moves off of the list of affected areas, and when you report it, you must offset the amount by purchasing new livestock.
Expenses
Form T2042 also has sections to record your business expenses. You must differentiate between current and capital expenses, as you can claim all of your current expenses, but only a portion of your capital expenses.
Keep in mind that you cannot include salary paid to yourself, the cost of goods consumed by your family, or the cost of personal purchases as expenses on T2042.
When filling out your expenses on form T2042, it is best to have a detailed list of your expenses on hand, as the form requires you to report different expenses on different lines. For example, the cost of containers gets reported on line 9661, while money spent on seeds is applied to line 9664.
Details of Equity – Part 9
To paint a picture of your farm’s equity, this section prompts you for information about your total business liabilities (accounts payable, outstanding mortgages, etc), as well as your capital contributions and drawings. A drawing is a cash withdrawal from your farm, but if you change a piece of machinery from business to personal use, that also counts as a draw.
If your farm is required to file a partnership information return, you do not have to fill out this section.
AgriStability and AgriInvest Participants
- If you participate inAgriStability or AgriInvest programs, you must file form T1163 or T1273.
- If you live in Prince Edward Island, Ontario, Saskatchewan or Alberta, file form T1163.
- If you live in the rest of Canada aside from Quebec, file form T1273.
Like T2042, these forms also request your farming income and expenses, but they contain an authorization form so the CRA can share your information with these farm support programs to determine your eligibility.
If you have additional farming operations, fill out forms T1164 or T1274, and submit a form for each farm.
References & Resources
- CRA: Livestock Tax Deferral Provision
- Revenu Quebec: Farming – Business Income