CANADA REVENUE AGENCY
Canada’s revenue agency. Let’s talk about the CRA and it’s short codes. What is A T2125? It’s just another one of those forms that the CRA makes you fill out. 😊 So, what is it and who needs to fill it out and what do you need in order to fill it out?
The T2125 is the form required for all self-employed/sole prop business owners to fill out to declare their taxes. Basically, anyone who is unincorporated needs to be familiar with this form. So that can be a partnership, a limited liability and anybody who gets a T4A as well, you don’t actually need to be a registered business in order to have to fill this out. As long as you have some kind of employment that isn’t showing up on a T4, you (or your accountant or bookkeeper) will need to fill out this form for the CRA.
Now, what is the T2125? This is the form used to calculate how much tax you owe and to declare how much tax you have to pay to the Canadian government. There are a bunch of different sections to this.
First of all, what is your business? How are you doing business? All of that information. And then the part that your bookkeeping team ♠ can help you fill out. This is the part where you declare all of the monetary values of the things that you’ve done over the course of the year – your income as well as your expenses.
LET’S BREAK THOSE DOWN AS WELL!
We’re talking about a summary of the whole fiscal year. How much income did you make? How much HST did you collect? What was the value of your cost of goods? Break them down! What were your expenses? Break those down as well! And then, there’s even a section for home office expenses, car expenses, depreciation and more. And you put in all of the numbers and then it creates a calculation of how much tax you owe.
Now, If you’ve been doing your bookkeeping up to this point and you’ve been keeping on top of it – if you’ve been using a spreadsheet or if you’ve been using an online bookkeeping program, or you have a bookkeeper who’s been doing it for you, then what you’re needing at this point is simply called… wait for it… your profit and loss.
Your small business profit and loss breaks all of this information down for you and gives you the numbers to plug into the T2125.
Once you have the form filled out, then you can just submit that to your accountant or if you do your own taxes and you’re using an online tax service, then they’re going to have all of those categories broken down, and you’re going to have a place to plug this information in.
The CRA requires all business owners to submit their taxes – it is required. The T2125 is the way that you make the calculation and so you should be familiar with it or your accountant should be familiar with it. Always remember that it takes all of the information from the profit and loss, so make sure your bookkeeping is up to date and you’ll be ready for tax time! If you have any questions about the T 2125, our team at♦ Zetique is always happy to chat!