T2125 Form and Sales Tax

by Clare
(Edmonton, Alberta)

Entering Expenses Into T2125 Form

When entering expenses into the T2125 form, do I include the GST in that expense?

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Hi Clare,

It depends on whether you are a GST/HST registrant or not ... and how you have kept your books.

You are Not a GST/HST Registrant

Let's start with the easiest first.

If you are not a GST/HST registrant, it means you do NOT collect GST/HST. Any GST/HST you pay is posted as part of your expense as you can't claim ITCs ... so yes the sales tax is included on form T2125.

You are a GST/HST Registrant

If you haven't been keeping a set of books throughout the year ... and prepare your tax form T2125 by making tape listings to calculate what goes on each line, then the GST/HST will likely be included in your line totals. You will need to back out the GST/HST paid as you should have already claimed it on your GST/HST report.

You will also notice that in Part 1 there is a spot to subtract the GST/HST if it is included in your sales total (A). If the tax is not included in your sales total, you just leave this line blank.

If you have been keeping a complete set of books using one of the popular small business accounting software packages, you should be able to print out a report that gives you your tax information. You would then just input it on the appropriate line.

Just remember that you must backout any personal expenses or input tax credits you have already claimed.

I hope this helps Clare. Follow the links I've given for more detailed information. If you don't understand something I've said, just post back here and ask.

Comments for T2125 Form and Sales Tax

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Dec 17, 2016
Too Many Factors Leave Me Confused
by: Terri

I am bringing my client's books up to date -- he has not filed income taxes in four years. He was a sole prop from 2011 to Apr 2014. His revenues during that time were well over $30K so he should have registered for a GST# but did not do that until he incorporated in Apr 2014. Regardless, he still must remit the GST collected whether he was registered or not, right? So, I am preparing his T2125 (first time doing this) and want to know how to claim ITCs because the expenses I am claiming are do not include GST. I didn't know when I started entering the data into the bookkeeping software that I should have left the GST in. I suppose I can simply add 5% to the expenses I am claiming -- yes? I've never done a T2125 before or a personal inc tax return and want to be sure I am handling the GST correctly. Thanks.

Dec 21, 2016
by: Lake


The sad news is ... it is my understanding that he will not be able to claim any ITCs for the years he wasn't registered but he does have to pay GST/HST on the sales amounts over $30K.

Here is my understanding of the rules from my GST/HST Guide:

"When you meet or exceed the small supplier threshold of $30,000 in a quarter, you are considered registered and must begin collecting GST/HST on all sales after the threshold has been met. HST GST registration must officially be applied for within 29 days of collection beginning.

If you meet or exceed the small supplier threshold of $30,000 over four consecutive quarters, you must begin collecting GST/HST one month after the fourth quarter. You have 29 days from when you begin collecting to officially register.

If you do not officially register when you meet the threshold of $30,000, you will lose your ITCs ... ouch! Expensive!"

I strongly recommend you take some personal income tax return preparation courses BEFORE offering tax preparation services to your clients. It is not as simple as filling in a few forms or relying on the software program to get it right.

Dec 21, 2016
GST and ITCs
by: Terri

Hi and thank you. I did enroll in an online tax course which I find very comprehensive except in this area. I will put my questions to the instructor for further clarification. Thanks for the information you provided!

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