I am self-employed; how do I report income in Canada?
If you are self-employed, you need to report your income on your personal tax return. The form you need to complete is called a T2125 - Statement of Business Income. In this form, you report the income you have received as well as the expenses you have paid to earn said income.
These are common expenses you may claim:
- Meals and entertainment
- Advertising
- Insurance
- Office expenses
- Legal and accounting fees
- Supplies
- Sub-contractors
- Travel
If you work from home, you can claim a portion of the home expenses for your in-home office. Use our Home Office Expense template to keep track of the expenses and space throughout the year.
If you drive to worksites and locations with your personal vehicle, you'll want to keep a mileage log or use a mileage app such as MileIQ to separate the business miles from the personal miles driven. This is then used to allocate a portion of the vehicle expenses to apply against the business income.
If you are hired as a sub-contractor, you may receive a T5018 from the corporation or person who hired you at any point of the year. This is the Canada Revenue Agency's (CRA's) check and balance to keep track of who is paying whom, and who has income they need to report. However, as some companies may file at periods other than December 31, you are required to keep track of your earnings.
See our sample income statement to help you capture all the information required.