Organize your business income and expenses separately from personal spending, keep the supporting documents, and prepare a clear summary for each business. A spreadsheet is useful, but it should point back to invoices, receipts and statements.

This guide is for freelancers and sole proprietors, rather than incorporated businesses. Our self-employed tax return service brings your business reporting and personal return together.

Use five simple folders

1. Income: invoices, payment-platform reports, cash-sale records, refunds and year-end amounts still owing.
2. Expenses: receipts sorted into categories such as supplies, advertising, insurance, professional fees and software.
3. Assets: purchase and sale documents for equipment, furniture and vehicles. Keep these separate from routine expenses.
4. Shared costs: vehicle logs, phone-use calculations and workspace details showing how business and personal use were separated.
5. Tax accounts: GST/HST registration details, reporting periods, filed returns, payments and CRA correspondence.

Reconcile income before adding up expenses

Compare your sales records with bank deposits and payment-platform statements. Identify transfers between your own accounts, loan proceeds and owner contributions so they are not accidentally counted as customer revenue. Identify platform fees separately; the amount deposited may already have fees deducted.

For example, if a customer pays $500 and a platform retains a $15 fee, record the transaction and fee separately, with any applicable sales tax identified. Keep the platform statement supporting the $485 deposit.

Support the business portion of expenses

Only the eligible business portion of mixed expenses belongs in your claim. Keep a vehicle log showing business trips and total kilometres. For a workspace claim, provide the area, how the space is used and the relevant costs; qualifying conditions and limits still apply.

Equipment may require capital cost allowance treatment rather than an immediate deduction. If you claim GST/HST input tax credits, the same recoverable tax generally must not also remain in your income-tax expense.

Do I need a T2125?

Form T2125 is used to report business or professional income and expenses. The information needed depends on your activity. Tell your preparer about separate businesses rather than combining everything into one unexplained total.

A monthly habit that saves work later

Choose one day each month to download statements, photograph fading receipts, reconcile income and flag unclear expenses. Label files with the date, supplier and purpose. Keep the original supporting records even after creating your summary.

Need help preparing the return?

See our self-employed tax preparation service for London, Ontario and online clients across Canada. We will confirm the work and fee after reviewing your needs.

Related guides

• When Do You Need to Register for GST/HST in Canada?
• What Documents Do You Need to File Your Taxes in Canada?

Official sources

• CRA: Keeping records
• CRA: T2125
• CRA: Business expenses
• CRA: Motor vehicle expenses

General information only. The applicable tax year, your records and your circumstances determine the treatment. Contact us for guidance based on your circumstances.