If you have farming income or losses, you must report them to the Canada Revenue Agency. However, the form that you need to use varies depending upon where you live, your participation in certain farm support programs and the structure of your business.
Self-Employed or Small Business Farmers
In many cases, if you are a farmer, you report your income as if you are self-employed or a small business owner. Using form T2042, you detail your farming income and expenses.
However, if you participate in the AgriStability or AgriInvest programs, do not complete this form unless you live in Quebec.
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 run your farm with a partner, you likely file your taxes just as if you are self-employed.
Partnerships can consist of written or verbal agreements, and you may opt to split up the farming business any way you see fit. You and your partner should file your taxes according to the split you use.
For example, if you split the farming business 50-50, each of you should report 50 percent of your farming income and losses on form T2042. Also remember to complete the details of other partners chart on that form.
The CRA does not require farming partnerships to file a T5013, Partnership Information Return. However, farming partnerships that include a trust or corporation must file the T5013.
Employed as a Farmer
If you work as an employee on a farm, you do not claim your income as farming income.
- Instead, you should receive a T4 slip at the end of the year from your employer.
- Report the income from that slip on your federal income tax return (T1).
As an employee, you cannot write off farming expenses. However, you may write off certain qualifying employee expenses including travel, allowable motor vehicle expenses and supplies. The items must be required for your employment and not reimbursed by your employer.
If you work for a farmer as an independent contractor, the farmer should issue you a T4A slip at the end of the year. As an independent contractor, you have to declare your income and take responsibility for your own Canada Pension Plan contributions and payroll taxes. However, you can claim more expenses than a worker who is classified as an employee.
If you fall into either of these categories, you do not have to submit any special forms related to reporting farming income.