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Filing Taxes as a Small Business Owner

By January 31, 2019 November 4th, 2019 No Comments

Disclaimer: we are not tax experts! We’re here to help provide a general overview on the requirements, but everything may vary on your individual situation. We always recommend seeking professional advice to help answer any specific questions you may have on your business and personal tax situation!

It’s the most wonderful stressful time of the year—but it doesn’t have to be! Tax season is right around the corner, and we’re back with even more guidance to help you through it. To kick off the season, here is an updated overview on filing your taxes as a small business owner.

What is your business structure?

Most small businesses start as sole proprietorships—this is the structure we will be covering in this article. It’s important to know which type of structure your business operates under because this determines which tax forms are applicable to you. For sole proprietorships, you report business income on your personal tax return by filling out Form T2125: Statement of Business or Professional Activities. The same form is used if you have an unincorporated business with a partner (or partners). If you are a corporation, you will need to fill out Form T2.

All income, not matter how trivial, needs to be reported.

If you are unsure about your income and what to report, read this article: https://www.canadaone.com/ezine/feb2013/self_employed_taxes.html

Two options for filing your tax return

Canadians now have two options for filing their tax returns:

  • download the tax return package, or
  • use a CRA certified software.

We recommend Simple Tax or Turbo Tax or you can visit Canada.ca for a comprehensive list of CRA certified software both free and paid.

If you opt for the online form rather than using a certified software, you’ll need to request your tax package for the current year for your province or territory on December 31st of the tax year for which you are filing for.

Preparing Your Tax Return

Once you actually get started, you’ll see that your return is made up of three distinct parts.

Identification

Here you’ll provide all the general details about your business such as your business name, address, and industry code (again, you can visit canada.ca to find this). You’ll also need to prepare information regarding your partner(s) if applicable. You’ll also need to provide the fiscal period for your business as this will determine when you need to file by.

Business Income

As the section name states, this is where you will be reporting all of the income you made through your business in 2018. Keep in mind this section is for your Gross Income—you will report your expenses in the next section. Depending on your business operations, this could also include GST/HST amounts, discounts, or other information.

Business Expenses

The last section of your return will be where you report all the money you’ve spent on your business in the last year. This includes supplies, advertising, meals, travel, vehicle, and many more. Make sure to track all of your expenses with an accounting software, like Kashoo, throughout the year. With our mobile app, you can easily take a photo of your receipt on-the-go and ensure you don’t leave any money on the table!

Tip: If you operate your business from home, you could be qualified to claim home office expenses!

For more information on preparing your tax return, check out our article on filing taxes as a small business owner!

Deadlines

As a self-employed small business owner (whether sole proprietor or non-incorporated partner) you have until June 15 of each year to file your tax return. However, do remember that any balance owing to the CRA must be paid in full by April 30. This means your taxes are actually due on the same date as all other Canadians.