Status Indian - Self-employment incomeIf you are a Status Indian and are exempt from paying certain taxes, you must indicate this in the program. This will allow the program to exempt the income tax you earned on a reserve.
Please complete the first step as follows:
1. On the "Left-side menu on the Interview tab", select the topic "Interview setup".
2. On the screen to your right, check the box for "Tax return for a status Indian." Then go to the "Self-employment" group and check the box "Self-employed income" and click "Next" at the bottom of the page;
3. Return to the "Left-side menu on the Interview tab" and select the "Status Indian".
4. On the page that appears on the right entitled "Status Indian exemptions", to the question "Please confirm that you are a Status Indian with rights to exempt income", you must answer "Yes" (i.e you are a Status Indian).
Quebec residents should indicate information for the "Quebec drug insurance plan". You should specify your situation by selecting option "4 - Exceptions, Quebec insurance plan, all year" and specify the exceptions by choosing "Registered Indian (code 24)".
To determine if your business income is taxable, you must determine if there are any factors that tie it to a Reserve.
To help you determine if your income is taxable or not, we suggest you visit the following CRA link:
https://www.canada.ca/en/revenue-agency/services/aboriginal-peoples/indians.html
We recommend that you read the section entitled "Business Income" or contact the CRA toll-free at 1-800-959-8281.
For residents of Quebec, consult the following link:
Since there are three (3) options, the first possibility being that you have earned your income 100% on a reserve, it is tax-exempt.
1. On the "Left -side menu of the Interview tab", select the "Self-employment income" section.
2. On the right page, click on the icon of the plus sign "+" on the right of the "T2125 - Business income" line.
3. Enter relevant information on the page titled "T2125 - Business Identification".
4. Then enter your income and expenses. And check the net income of your business located on the reserve.
5. Return to the interview and on the "T2125 - Business" page to the line "Amount of net business income (loss) exempt from tax under section 87 of the Indian Act" enter your net income.
In your federal return, no income will be entered into your return, therefore the 13500 line for business income will be blank.
However, for Quebec residents an amount will be registered on Line 164, however, on Line 293, "Deduction for an Indian" the amount of line 164 will be deducted.
It should be noted that Quebec residents must contribute to the Quebec Parental Insurance Plan (QPP).
The second possibility: if you have earned your income outside the reserve, this one is taxable.
Enter the information in the "T2125 - Business" page which is in the "Income, expenses" sub-section.
Third possibility: you earned your income both on and off the reserve.
If the third option applies, you must report your self-employment income according to the following steps based on a request from the CRA.
1. Since your income was earned in two locations, one part on a reserve and the other outside the reserve, you must create two (2) entries for your income, namely you have to complete two groups of self-employment income, one for income earned on the reserve and the second for income earned outside the reserve, in order for you to file your federal return via NETFILE.
2. Select the "Self-employment income" and on the page "T2125 - Business identification", enter your company information and at the bottom of the page click on "Next".
3. On the page that appears, entitled "T2125 - Business" found in the "Income, expenses" sub-section, enter the relevant information. However, on the line "Amount of net business income exempt under section 87 of the Indian Act", enter the amount earned on a reserve. Enter on the line "Gross sales, commissions or fees" the same amount as on the previous line.
4. You must create your second business for income earned outside the reserve. In the "T2125 - Business identification" page, repeat the same information as for your income earned on a reserve.
5. On the "Income, expenses" sub-section, enter the information on your gross income and the expenses incurred to earn that income outside the reserve.
In the federal return, the gross amount will be generated by the program on line 13499 and your net income on line 13500. For Quebec residents, the amount of your income will be reported on line 164 and the non-taxable amount earned on a reserve will be entered on line 293.
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