T1 General income tax return
A T1 General income tax return is the personal income tax return an individual files with the CRA. A sole proprietor reports business income on Form T2125 as part of that return, which is why buyers and lenders may ask to see it.
A lender or buyer may ask for personal returns when the business is a sole proprietorship, or when the buyer’s own finances matter to the deal. The CRA says to use the T1 income tax package for the province or territory where you lived on December 31 of the tax year, and gives other rules for people who lived outside Canada for all or part of the year. This entry covers the federal return and does not describe provincial filing.
Where business income appears
The CRA says a sole proprietor calculates and reports business income using Form T2125, Statement of Business or Professional Activities. Its self-employed guide adds that you must report all your income in your income tax return, and it sets out a separate filing date for people with self-employment income, subject to an exception the guide states. Check the current guide for that date.
What to check
- Whether a Form T2125 is attached to each year’s return.
- Whether net business income on the return matches the seller’s books.
- Whether each year has a notice of assessment from the CRA.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentGet a T1 income tax package
- 02Canada Revenue AgencyGovernmentSelf-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 1 – General information
- 03Canada Revenue AgencyGovernmentSole proprietorships and partnerships
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