Taxes in Canada - T1 income for the proprietor
Wave is an excellent software package for the self employed (proprietor) entrepreneur. It easily keeps track of billings, collections and disbursements. It allows the entrepreneur to see his or her income at a glance.
The income of a proprietor is revenue less expenses. There is no T4s issued for a proprietor - although a proprietor can have employees under their business number xxxx xxxxx RP0001.
The Wave accounting information can be easily transferred to the T2125 (business income) schedule on a T1 return. There are a few adjustments to reconcile accounting income with taxable income:
- Meals and Entertainment - 50% of the total recorded on the Wave expense for M&E
- Office-in-the-Home - this is an advantageous expense but must be applied carefuly
- Business use of personal vehicle.
Your "business income" calculated from the T2125 schedule is transferred to your T1 page. The income (if over the provincial and federal minimums) is subject to taxation at your marginal rate of taxation. In addition, there is Canada Pension Plan (CPP) payable on self employment earnings (4.95% x 2).
The fiscal and calendar year ends of a proprietorship is December 31st.