How to Fill Out Form T2125 for Self-Employed Taxpayers in 6 Simple Steps

If you’re a self-employed individual aiming to independently handle specific sections of your tax return, such as home-office expenses, vehicle expenses, and Capital Cost Allowance, this guide will walk you through completing Part 1 of Form T2125, the Statement of Business Activities.

Step 1: Filling Out Your Details

Input your full name.
Provide your social insurance number.
Mention your business name. If you’re operating under a different name, specify that.
If you have a business number from the CRA, include it.
State your business address.
Specify the tax year’s start and end dates, typically from January 1 to December 31. If you’re new to business, mention the commencement date.
Indicate if 2016 was your inaugural business year. For this guide, we’ll assume it wasn’t.
Describe your primary product or service. For instance, let’s say you sell yellow wigs.

Step 2: Reporting Your Annual Sales In the form’s initial section, record your yearly total sales. For our example, let’s assume sales of $300,000, excluding GST or HST.

Step 3: Cost of Goods Sold In the form’s fourth section, detail the cost of goods you sold throughout the year. For instance, if you purchased inventory worth $100,000 and sold it all, with no starting inventory, that’s the figure to input.

Step 4: Calculating Gross Profit Determine your yearly gross profit by subtracting the cost of goods sold from your gross sales. Using our example:

Gross Sales: $300,000
Cost of Goods Sold: ($100,000)
Gross Profit: $200,000

Step 5: Detailing Business Expenses In the fifth section, list down your business expenses. Remember, only 50% of meals and entertainment costs are tax-deductible. In our example, the total yearly business expenses amount to $32,000.

Step 6: Determining Net Income Calculate your net income by subtracting total business expenses from the gross profit. For our example: