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I don’t have a business, why do I need to report business income?

When you receive self-employment income (including contractor income) you must report it on a form T2125. You may need to complete this form even if you didn’t know you have a business. You don’t need a business number (or to have registered with the CRA) to complete this form.

Completing form T2125

  1. Add the Business income section to your return.

  2. Indicate whether you have business, commission, or professional income.

    While most people know if they have commission income, many people aren’t sure whether they have business or professional income. Choose business unless your profession is listed here.

  3. On the Identification tab:

    • Enter your home address in the address fields.
    • Select an Industry code. To find your Industry code, type something related to your work in the Industry Codes search (e.g., barber, engineer, photograph, music). Industry codes are mostly used for statistical purposes so your choice doesn’t need to be perfect.
  4. On the Income & Expenses tab:

    • Enter your gross sales at the top of the tab; this is the total amount of your self-employment income. If you received a slip like a T4 (with amounts in box 81, 82, or 83), a T4A (with amounts in box 20 or 48), a T1204 or a T5018, enter that amount here.
    • At the bottom of the tab you’ll need to report the taxable part of gains on dispositions of ECP included in income (you should enter $0).
    • Just below that, indicate whether tax was withheld on the income you earned from this business. The answer to this question is mostly likely No. However, if you are reporting income from box 81, 82, or 83 of a T4 the answer may be Yes and you should also complete the T-slip tab.
  1. Add the Business income section to your return.

  2. Complete the mandatory fields on the Identification tab:

    • Select what type of income you received: business, commission, or professional income.

      While most people know if they have commission income, many people aren’t sure whether they have business or professional income. Choose business unless your profession is listed here.

    • If you run your business from home, or only work at client sites, answer “No” to the question “Does your business have its own address?”

    • Select an Industry code. To find your Industry code, type something related to your work in the Industry Codes search (e.g., barber, engineer, photograph, music). Industry codes are mostly used for statistical purposes so your choice doesn’t need to be perfect.

  3. On the Income & Expenses tab:

    • If you received a slip (e.g., T4, T4A, or T1204) that reports some or all of your self-employment income, add it to your T2125 from the source slip (e.g., T4, T4A, or T1204). A row will appear in the Income & Expenses tab showing that income. If you received any other income, add it to the “Gross Income” row.

Most people who didn’t realize they had a business won’t complete any other fields on the T2125.

If you’ll continue to be a contractor in the future, you may want to review the CRA’s guide to completing the T2125, especially the list of allowable expenses as you are allowed to write off certain things against business income. Claiming expenses could be helpful for next year’s return.