Running your own business changes your life in so many ways, why would doing your income tax be any different?
Whether this is your first year of filing your taxes as a business or you’re an old hand, here’s a refresher on the three main ways being a sole proprietor changes the process of doing and filing your income tax.
1) As a sole proprietor, you have a different income tax filing deadline.
Self-employed people such as sole proprietors have until June 15th to file their income tax. This applies to spouses too, so if your spouse or common-law partner is self-employed, you also have until June 15th to file. However, note that the payment due date for any balances owing on your income tax was April 30th.
Are you unsure about whether the Canada Revenue Agency (CRA) would consider you to have business income or not? See you may have business income and not even know it!
2) You report your business income as well as your personal income on your T1 income tax return.
- You don’t need a separate or different tax return to report your business income.
- You report your worldwide total income on the T1 general income tax return.
So if you have several different businesses, or employment income as well as business income, or investment or pension income for that matter, it all gets reported on the same tax return.
- Business income is reported on Form T2125, which is part of the T1 return.
- If you have more than one business, you will need to use a separate T2125 form for each.
3) All your business tax deductions are reported on Form T2125.
One of the great things about running your own business is that you have a much larger pool of potential tax deductions, from the cost of a new printer cartridge in your office through Capital Cost Allowance.
Here’s a list of common business deductions for a small business. All of your business expenses and deductions will be recorded on Form T2125 and then subtracted from your business income, resulting in your net business income or loss.
Did you know that you can claim some business expenses before your business even opens?
Which TurboTax Is Best for Your Business?
While all TurboTax products allow you to report self-employment income, TurboTax Home & Business is the best choice for doing and filing your income tax if you’re a sole proprietor, member of a partnership, or otherwise self-employed.
It has an enhanced business interview that offers step-by-step instructions to help you complete the self-employment business forms and additional help to guide you through the self-employment section of the tax return.
(And it’s great for entering investments and rental property, too!)