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T4002 Guidelines and Help

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Many Canadians are self-employed, professionals, commissioned employees, or work in fishing or farming. Guide T4002 is a document that can be used by persons who are either sole-proprietors (in business; are professionals such as doctors, lawyers, or accountants; are commissioned sales employees, or are in the business of farming or fishing) or are partners in a business partnership, professional partnership, or a farming or fishing partnership. Guide T4002 helps these persons calculated their self-employment income. If the business is incorporated or operated by a trust, different forms must be used. Additionally, there are special guidelines for farmers and fishers.

The CRA T4002 guide provides relatively lengthy instructions for how individuals should go about reporting their income. The guide is relatively comprehensive, though not complete, and can be overwhelming for individuals to work through. Working through this guide will allow persons to fill out CRA form T2125 “Statement of Business or Professional Activities” on which professional or business income and expenses are reported. This article will first help you determine whether you need to refer to guide T4002 and then briefly provide some help with filling out CRA form T2125.

You should use guide T4002 if you have business income. A business includes, but is not limited to, a profession (dentist, architect, doctor, chiropractor, lawyer, accountant, and others whose activities are government under a statute), a trade (plumbers, electricians, etc), a manufacture, or any kind of continuous or one-off activity that is aimed at making a profit through the provision of goods or services. For farmers, business income includes, but again is not limited to, any revenues from soil tilling, livestock raising or showing, race horse maintenance, poultry raising, dairy farming, fur farming, fruit growing, beekeeping, wild-game reserve operations, and so on. For fishers, business income includes, but is not limited to, income from the sale of property or services related to fish, shellfish, crustaceans, and other marine animals.

Form T2125 is a relatively short 6 pages that covers all revenue and expenses from business or professional sources, so that the income from these sources can be accurately calculated.

Part 1 deals with identifying information of the taxpayer, the business, the fiscal period, and the business activity.

Part 2 is only used if there is income from internet business activity.

Part 3A deals with business sales, commissions, or fees and related GST/HST.

part 3B deals with professional fees and income, including work in progress and related GST/HST.

Part 3C adjusts the amounts in Parts 3A and 3B to get the gross business or professional income for the taxpayer. Once the gross income is determined

Part 3D deals with the deductible amounts related to the cost of goods sold (if income is derived from the selling of goods), so that gross profit can be calculated.

Part 4 then deals with deductible expenses that result in determining the net profit or loss from the business or profession.

Part 5 then provides some adjustments, as do Parts 6 and 7.

Partnerships have to fill out Part 8, while all others have to complete the form by filling out

Parts 9 that deals with equity of the business. The final two pages deal with residual matters such as capital cost allowance, motor vehicles expenses, and leasing costs of passenger vehicles.

Chartered Professional Accountant in Canada, U.S. and U.K.

Pro Tip


The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.


Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor which were rectified when Sam appealed the audit decision. Instead of owing significant amount of taxes, Sam reduced it to zero. I highly recommend to hire Sam for this type of audits and any CRA problem.”

E.M., Ottawa