T2125 - "New to self employment" basic questions - please help!
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Thread: T2125 - "New to self employment" basic questions - please help!

  1. #1
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    T2125 - "New to self employment" basic questions - please help!

    I am full time employed (Over 50k) + run a sole proprietor tutoring business from my home. My husband is regular full-time employed (Over 50k).

    Is commercial insurance on vehicle necessary to claim motor vehicle expenses for tutoring business? I have default autoplan insurance on it for now.

    I use all the money earned from business for personal use, does this mean the Drawings section ( T2125 - 9932) will be total income from the business? How will this affect the tax return?

    Can CCA Claim in T2125 be left blank? Can it be zero? How will this affect the tax return?

    I registered my business in May 2013, licensing in progress should be completed by June 2013. What is my fiscal period? Do I need to fill the reconciliation form? I would prefer not to change the year if not necessary.

    The From-to date for business in T2125 will be from date of registration or date of licensing, since I'll open business to clients after getting permits, etc.


    Thanks for your help!


  2. #2
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    I am going to answer your post as if I actually know the answers to your questions. Be warned, I do not.
    1) Default autoplan insurance is all you need, there is no need for commercial insurance on the vehicle in order to claim a deduction
    2) Do not complete the Details of Equity section, it will have no impact on your tax return
    3) CCA claim can be left blank. You are not forced to claim CCA, it can be zero. If you choose not to claim any CCA, any undepreciated capital cost you have associated with your business assets will be there in the future to claim. CCA claims will increase your deductible expenses and reduce your net income accordingly
    4) Use December 31 as your year end. No not complete the reconciliation
    5) Use your date of registration for the "From" date
    Again, please read the very first sentence. I trust this has been worth every penny paid.
    Good luck!

  3. #3
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    Talking Thanks but still not sure...

    Thank you for the prompt response , I would appreciate confirmation from someone else just to be sure.



    Quote Originally Posted by Jagas View Post
    I am going to answer your post as if I actually know the answers to your questions. Be warned, I do not.
    1) Default autoplan insurance is all you need, there is no need for commercial insurance on the vehicle in order to claim a deduction
    2) Do not complete the Details of Equity section, it will have no impact on your tax return
    3) CCA claim can be left blank. You are not forced to claim CCA, it can be zero. If you choose not to claim any CCA, any undepreciated capital cost you have associated with your business assets will be there in the future to claim. CCA claims will increase your deductible expenses and reduce your net income accordingly
    4) Use December 31 as your year end. No not complete the reconciliation
    5) Use your date of registration for the "From" date
    Again, please read the very first sentence. I trust this has been worth every penny paid.
    Good luck!

  4. #4
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    Quote Originally Posted by ashsriniindia View Post
    I am full time employed (Over 50k) + run a sole proprietor tutoring business from my home. My husband is regular full-time employed (Over 50k).
    Is commercial insurance on vehicle necessary to claim motor vehicle expenses for tutoring business? I have default autoplan insurance on it for now.
    Assuming the car is used to get to and from the tutoring appointments (i.e. not central to the business), regular insurance should be fine. I'd confirm it with your insurance company though to be sure to avoid any issues.

    Also, if you are going to claim car expenses against the tutoring business and you are employed elsewhere - likely the car use is not 100% for the business so a trip log should be kept. This will allow the expenses to be split up properly (as well as provide documentation if CRA audits the business).

    http://www.taxtips.ca/smallbusiness/...leexpenses.htm
    http://www.taxtips.ca/smallbusiness/triplog.htm


    Quote Originally Posted by ashsriniindia View Post
    I registered my business in May 2013, licensing in progress should be completed by June 2013. What is my fiscal period? Do I need to fill the reconciliation form? I would prefer not to change the year if not necessary.
    I'm not sure whether being full time employed elsewhere makes a difference but here is one link:
    http://www.taxtips.ca/smallbusiness/...ngayearend.htm


    Cheers
    Last edited by Eclectic12; 2013-05-21 at 09:04 PM.

  5. #5
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    Fiscal year doubt

    Quote Originally Posted by Eclectic12 View Post
    Assuming the car is used to get to and from the tutoring appointments (i.e. not central to the business), regular insurance should be fine. I'd confirm it with your insurance company though to be sure to avoid any issues.

    Also, if you are going to claim car expenses against the tutoring business and you are employed elsewhere - likely the car use is not 100% for the business so a trip log should be kept. This will allow the expenses to be split up properly (as well as provide documentation if CRA audits the business).

    http://www.taxtips.ca/smallbusiness/...leexpenses.htm
    http://www.taxtips.ca/smallbusiness/triplog.htm




    I'm not sure whether being full time employed elsewhere makes a difference but here is one link:
    http://www.taxtips.ca/smallbusiness/...ngayearend.htm
    Cheers
    Thanks, so from what I understand.. you do not need to change the fiscal year: I'll just write from-to dates startung from date of registration to ending on december 31.. and write the income and expenses for the period.
    I would also prefer for this process to be least complicated. So if its an option, I would keep it the way it is.
    please confirm.

  6. #6
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    GST/HST Doubt

    I have doubts on whether I should register for GST/HST.. Please help!

    From the CRA Document here Please refer page 9-10 http://www.cra-arc.gc.ca/E/pub/gp/rc4022/rc4022-13e.pdf

    I registered for the business from May 1, 2013. I am also employed regular full-time.

    Do I need to calculate my "calendar quarters" from the date the business was registered (applicable quarter april-june I think) or from the beginning of the year?

    Say I calculate my first quarter from between april to June ( since the business was registered in between), shall I calculate 30k from the Gross income or the pay at hand excluding all deductions from my regular employer PLUS Business Income?

  7. #7
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    I think you can choose your fiscal year to be whatever you need, but not sure about that one.

    The 30k income they are talking about is only from your business, not from your job. Unless you are making 30k/year at your new business then you don't need to register for GST/HST.

  8. #8
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    Quote Originally Posted by Spudd View Post
    I think you can choose your fiscal year to be whatever you need, but not sure about that one.

    The 30k income they are talking about is only from your business, not from your job. Unless you are making 30k/year at your new business then you don't need to register for GST/HST.
    Self employed folks report on calendar basis, it's not like the corporation where you can choose any fiscal year end.
    Once your revenues exceed 30K in consecutive quarters you have to register for gst, if your revenues are less than that you don't have to but you can, it is beneficial to you because you can claim hst paid on expenses, or if it makes sense one can pick quick method of filing hst.

    What the profit is used for has no bearing on the tax return, simply put your profit is taxable regardless if it's used for personal expenses or to expand the business, if you were incorporated it would be different.

  9. #9
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    Equite section : Drawings and Capital contributions

    Thanks for your help

    I am still not clear on the Equity section for sole propreitors;
    Say I earned $5000 and withdrew all the money gradually towards personal expenses (transferred from business-personal acct); I assume this would mean I enter full money debited in Drawings section. Then, considering the business expenses in total, my business will go in loss. I do have other sources of income than my business, so will I still get tax deductions for the expenses?Is it advisable to leave money in business or is it natural for sole proprietors to take out all income as salary?

    I didn't give any money towards business income but I did give some % of my "personal assets" like mobile phone, laptop,house etc towards business use. Does that count in the Capital contributions section? Or is it just money transferred into business acct ( which is 0)?

    Reference: Details of equity http://docs.quicktaxweb.ca/ty10/engl...02_equity.html

    Last edited by ashsriniindia; 2013-07-16 at 04:47 PM.

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