BUSINESS INCOME
Parts 3A and 3C of T2125:
Business income is calculated in Parts 3A and 3C of the T2125. Depending on the software used used, it will ask for information and use it to compete these parts.
The amount on Line 8299 is reported on Line13499 of the T1:
Reporting income if not registered for HST:
Gross sales are reported on Line 3A and the software will repeat the number on Line 8299.
Reporting income if registered for HST:
Gross sales incuding HST are reported on Line 3A, and total HST collected (or that should have been collected) is reported on Line 3B. The software will enter the differenence on Line 3C.
Beyond these three lines, completion of Parts 3A and 3C depend on what method of HST is used - regular or quick.
Reporting income if the regular method is used:
Lines 3G, 8000 and 8299 are all equal to the amounts on Line 3C, ie gross income net of HST. Line 8299 is reported on the T1 as gross business income. This is straigtforward. It’s more complicated if using the quick method.
Reporting income if the quick method is used:
If the Quick Method is used, it is best to do the HST return first, at least in draft, and then do the following in the T2125:[1]
Example 1 using quick method:
HST return:
T2125:[2]
Example 2 using quick method:
In this example there are zero-rated supplies and capital expenses:
HST return:
T2125:
Business income earned before moving to Ontario:
If a person resided and earned business income in a province other than Ontario, and then sometime during the year moved to Ontario and was a resident of Ontario on December 31st, they will file as an Ontario resident but the business income earned in the other province is taxed by that other province.[3] In this situation, Form T2203 must be completed.[4] Ufile accommodates Form T2203 for efiling but Turbotax and wealthsimple do not.[5]
Amounts received through internet platforms:
A person may have received payments through an internet platform such as:
Recent amendments to the Income Tax Act require some operators of digital platforms to report payments made to Canadians through their platforms. Reporting is due by January 31 following the tax year, starting with the 2024 tax year.[6] Due to these amendments (and by other methods as well), the CRA may have information about amounts received through platforms.
Is income or loss from a hobby or a business?
Before reporting income (or a loss), it may be necessary to assess whether it is from a hobby or other personal endeavour, and not a business, since such income is not taxable and not reported.
Income or loss is from a business if derived from an activity undertaken with the predominant intention of making a profit.
If the nature of the activity is purely and genuinely commercial, further analysis is not required because such activity is inherently pursued for profit. However, if the activity has elements of a hobby or other personal pursuit, it is necessary to to determine whether the activity was undertaken in a sufficiently commercial manner with the predominant intention of making a profit.
For a more detailed explanation, see the page on this topic.
[1] A partial reference: bottom of page 2 of the T2125: “For Parts 3D, 4 and 5, if GST/HST has been remitted or an input tax credit has been claimed, do not include GST/HST when you calculate the cost of goods sold, expenses or net income (loss). If you are using theq quick method for GST/HST, include the GST/HST paid or payable when you calculate the cost of goods sold, expenses, or net income (loss).”
[2] If using WealthSimple Tax, all of the Lines you need to complete won’t appear unless you enter an HST business registration number (format 123456789RT0001)
[5] See the capabilities of different software on this CRA webpage.
[6] Part XX of Income Tax Act; Amendments to CRA re: reporting rules for digital platform operators
