Reporting income and loss – farmers and fishers
You report your farming and fishing income based on a fiscal period. A fiscal period is the accounting time covered from the day your farming or fishing business starts its business year to the day it ends its business year.
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Choosing your method of reporting
You can report your farming or fishing income using the cash method or the accrual method of accounting. For information on these methods or if you want to change the one you are using, go to Accounting methods.
When you calculate your income using the accrual method, the value of all inventories, such as livestock, crops, feed, fertilizer, fish, fish by-products, supplies and so on, will form part of the calculation.
You can earn farming or fishing income as a self-employed farmer or fisher, or as a partner of a farm partnership or a fishing partnership. Most of the rules that apply to a self-employed farmer or fisher also apply to a partner.
For more information on reporting methods, self-employed income and partnership income, go to Chapter 1 of Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
Note
Financial statements, prepared in accordance with generally accepted accounting principles, are completed using the accrual method.
Calculating and reporting your income
If you are a self-employed farmer or fisher or a partner in a partnership, you must give the CRA a statement that shows your farming or fishing activities for the year.
You have to complete a separate form for each business you operate.
To calculate your farming or fishing income and expenses, fill in one or more of these forms as needed:
For information on how to complete these forms, go to Chapter 2 of Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
However, if you are participating in the AgriStability and AgriInvest programs for farming income, use the correct AgriStability and AgriInvest form for your specific province or territory. For more information on these forms and which one to use, go to AgriStability and AgriInvest programs for farmers.
Reporting an employed fisher's income
Special rules apply to employed fishers. An employed fisher's income must be reported on a T4 slip, Statement of Remuneration Paid.
As such, you may have received a T4 slip that shows your fishing income. However, income earned as a crew member that receives a share of the catch (sharesperson) is considered self-employed income. This kind of income will not be shown on a T4 slip.
Since your T4 slip may not show all your fishing income for the year, you should keep a detailed record of all your fishing income. Enter the total income you received on Form T2121, Statement of Fishing Activities.
Your T4 slip also shows the amount of income tax that has been deducted from your fishing income for the calendar year. However, if your fiscal period ended on a date other than December 31, enter on line 43700Footnote 1 of your income tax and benefit return one of these amounts:
- the total tax deducted for the year, as shown on your T4 slip
- the part of the tax deducted for your current fiscal period. You will claim the remaining amount in the following year
In either case, include your T4 slip with your income tax and benefit return.
You can choose to have tax deducted on an amount you will receive from a catch. To do this, fill in Form TD3F, Fisher's Election to Have Tax Deducted at Source, which you and the buyer of the catch or the designated employer have to sign.
If you employ fishers, go to Guide RC4120, Employers' Guide – Filing the T4 Slip and Summary. For more information, go to Chapter 2 of Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
Calculating and reporting your loss
When the expenses for your farming or fishing business are more than your farming or fishing income for the year, you have a net loss. There are special adjustments for farming. For more information, go to Determining farm losses on this page.
If your net loss from farming or fishing is more than your income from other sources for that year, you will be able to carry back or carry forward the balance to reduce your taxes in other years. You can carry back a farm or fishing loss up to 3 years or carry it forward up to 20 years to reduce your taxes in those years.
How to deduct or carry back a loss
To carry back a farm or fishing loss from the current year to any of the 3 previous years, fill in Form T1A, Request for Loss Carryback, and attach it to your current year tax return. Do not file amended returns for the year in which you want to carry back the loss.
To deduct in the current year a farm or fishing loss from any of the 20 previous years, enter the loss on Line 25200 – Non-capital losses of other yearsFootnote 2 of your current income tax and benefit return. The available losses are generally shown on your notice of assessment. You can also get this information from My Account.
For more information on farming or fishing losses, go to Chapter 5 of Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
Determining farm losses
To determine your net farm loss for the year, you may have to use certain adjustments. The optional inventory adjustment and the mandatory inventory adjustment can increase or decrease your net farm loss. For more information, go to "Line 9941 – Optional inventory adjustment included in the current year" and "Line 9942 – Mandatory inventory adjustment included in the current year" in Chapter 3 of Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
The amount of the net farm loss you can deduct depends on the nature and extent of your business. Your farm loss may be:
- fully deductible (farming was your main source of income)
- restricted (partly deductible) (farming was not your main source of income)
- non-deductible (there was no intent to make a profit)
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