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Self-Employment Tax if You Have Farm Income

Last updated: Dec. 7, 2016 

Are You a Self-Employed Farmer?

According to the Canada Revenue Agency (CRA), the owner of a farming business is a non-salaried person whose main activity consists of working on a farm. That can include looking after all of the operations and extend to the maintenance of buildings, equipment, and fences.  

That may sound like a pretty obvious definition of a farmer, but it’s important as it helps CRA decide who has to be classified as a sole proprietorship.

That’s because, a sole proprietor operating a farming business is subject to the same criteria as any other sole proprietorship.

At the same time, to demonstrate to CRA that you are unemployed and not a self-employed farmer working a full week, you need to show that your employment-related work in farming is so minor that you would not be able to rely on it to support yourself.

Self-Employed and Small Business Farmers

If you are a self-employed farmer you must report your farming income or losses to the Canada Revenue Agency. But, the tax preparation forms will vary depending on where you live, participation in farm support programs, and the structure of your business.

Tax Breaks for Self-Employed Farmers

Fortunately, because the farming and agricultural sector is so unique, there are special conditions and rules when it comes to tax planning.

For starters, the government of Canada provides programs that could help protect farms from a drop in income.

Depending on which province you live in, you’ll need to file different forms to participate. On top of that, if you have additional farming operations you’ll need to submit different forms for each farm.

As a farmer, you can deduct all of the usual business expenses from your business, including all business-use-of-home expenses if you use your farmhouse for business reasons.

You can also claim deductions that other businesses cannot, including the cost of fertilizers and lime, veterinary, medicine and breeding fees, and even fence repairs.

Are You Entitled to Farming Benefits?

Because farming is seasonal, farmers may be able to qualify for benefits for the period that begins with the week in which October 1 falls and ends with the week in which March 31 falls. The farm tax experts at FBC can help determine if you qualify for these benefits.

FBC, Helping Canadian Farmers Minimize Their Tax Burdens

FBC has been providing tax consulting services to farmers and small business owners across Canada for over 60 years, helping customers minimize their income taxes and maximize their assets

As the country’s farm and small business tax consultant specialist, FBC provides comprehensive tax planning, tax preparation, consulting and bookkeeping services to tens of thousands of farm and small business owners.

What makes FBC unique? We provide an annual Membership. For a fixed fee, you get access to all of our services—not just tax preparation. Members can call or meet with a FBC tax consultant at any time, for no additional charge.

To ensure you’re starting off on the right foot, all new FBC Members receive a review of their previous 3 years’ tax returns.

For more information on how FBC tax specialists can help your farm or small business with its accounting, income tax preparation, financial planning, bookkeeping, and advisory services, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you at your earliest convenience.

Connect with your Local Tax Consultant to learn more