Do You Have Income that the CRA Considers Business Income?

With all the changes happening with the Canada Revenue Agency, I thought it might be a good idea to remind people about what is considered business income, in the eyes of the CRA:

Any money earned from a profession, a trade, the manufacturing of goods, or an undertaking that generates revenue of any kind, commissioned sales income, or any activity you carry on for profit and there is evidence to support that intention.

In other words, if you make any money at all that is not reported on a T4 or T4A, even if its from a hobby, the CRA considers this business income and it must be reported on your Income Tax Return.

There is a list of sources of income on the CRA Website. Those that apply to home-based or small businesses include:

• Revenue received for the sale of goods or services

• Bad debts received after being written off

• Vacation trips and awards received from Direct Sales companies

• Government grants and subsidies received

• Rental Income received

• Gift cards or certificates – sales are considered equivalent to a cash transaction

• Barter transactions are considered at their value, even if no money changes hands

The current penalty for failure to report all your income is 10% of the amount not reported. You may also be penalized for knowingly or intentionally make a false statement or omission on your income tax return. The penalty is an additional 50% of the tax attributed to the amount omitted. The minimum penalty is $100.

Ensure that you keep all the documentation for such earnings to support your claims on your tax return. These include:

• Sales invoices

• Cash register tapes

• Sales receipts

• Fee Statements

• Contracts

The good news that comes from having business income, is that you are entitled to claim business expenses, which I'll share in another post.

#homebasedbusiness #incometax #smallbusiness #2017taxyear #taxplanning #newbusinessowner