Aspects of Accounting Services for the Calculation of CRA Tax
If you are a Canadian and have a business of your own, it is important for you to know what your business income is, both in terms of definition and numbers. You can also opt for accounting services from a firm in case you are not sure how to do it correctly on your own. In addition to saving the eleventh-hour hassle, it will also allow you to file your taxes in a timely manner.
Read on to know more about what constitutes your business income and what aspects of it are taxable according to the Canada Revenue Agency (CRA).
What Constitutes Your Business Income?
They money you receive from your sole proprietorship, business partner or unregistered small business owner will be considered as your business income. In the course of your business, you are likely to raise an income from various sources other than your primary source of earning. If you do not receive wage from an employer, it is strongly recommended that you should monitor the earnings and keep a record of it on a daily basis.
Even as you do not register your business or declare the income linked to it, the CRA makes a note of all your income – whether big or small – and takes it into consideration. Therefore, it is a good idea to have credible evidence handy to lend credence to your profit intention if necessary.
Sources Of Business Income
Apart from the payments for goods or services, the CRA also considers the following sources as the sources of income for an individual:
- Vacation trips
- Bad debts
- Grants and subsidies
Why Is It Important To Have A Sound Knowledge of Your Business Income?
T 2125 tax form, the Statement of business Activities, is used to compute the professional or business income of self-employed people. If you are the only person in your business or run it with one to five other partners, you can use the form to find out the income originating from your proprietorship or partnership.
Deduct various business expenses such as home office, business mileage, home office and rent from your gross income to determine your net income.
Ensure that you calculate your adjusted income correctly to file your taxes in the right manner. Additionally, in order to avoid the possibility of facing a penalty, make certain you present a record of all your business income to the CRA.
Different Kinds of Business Records You Should Maintain to File Your Taxes
The CRA usually demands the records of one’s professional income plus the other expenses related to it. Also, it accepts various financial statements. However, producing the following documents is mandatory:
- Fee statements
- Sales invoices
- Cash register tapes
- Additional records of business income
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