Income Tax Return

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Preparing your income tax return involves a number of considerations, including: Does your business qualify as a business under CRA’s definition (i.e. does a reasonable expectation of profit exist)? If you work from home, are you eligible for the “work-space-in-the-home” tax deduction? If you have donated art, will you have to pay tax on a capital gain? Are you an employee or self-employed? What are the tax implications if you have received a grant? The income tax forms you need to report your business income depend on the form of your business.
If your business is a sole proprietorship or partnership, you report your business income on your T1 income tax form (the same one as your personal income). If you are operating a sole proprietorship, you will report your business income by completing Form T2124 (Statement of Business Activities) or Form T2032 (Statement of Professional Activities). These forms are included in the T1 income tax form package. If your business is incorporated, you will report your business income on a T2 income tax return. Depending on the complexity and size of your business, as well as your desire/ability to complete a tax return, you may wish to hire an account to both prepare your return and advise you on tax-related issues.

ONTARIO ARTIST – Tax and Business Information (link .url)
This site provides information on the tax implications of receiving grants, motor vehicle expenses, and work space in home expenses. It also contains additional information for artists that you may find useful.

CANADA REVENUE AGENCY – Guide for Canadian Small Business (link .url)
This is a comprehensive guide that addresses a number of tax-related issues for small business.

CANADA REVENUE AGENCY – Employee or Self Employed? (link .url)
This link will help you make the distinction between being employed and self-employed (sometimes, the distinction is not as obvious as one may think).

BUYING, SELLING, & DONATING ART (link .url)
This document addresses the tax implications of donating art.

INFORMATIVE TAX INC. – Reasonable Expectations of Profit (link .url)
This site provides information on how CRA assesses whether or not your business is actually a business. This is important because if CRA disagrees that you are running a business (i.e. they qualify your work as a hobby), they may disallow any business-related deductions that you have submitted and present you with a large tax bill.

 

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