Reporting your income
If you determine that you are self-employed, report your income from daycare as business income on your income tax and benefit return. Enter your gross daycare income on line 13499Footnote 1, and your net income or loss on line 13500Footnote 2.
Calculate your gross and net income (loss) on a fiscal year basis using the accrual accounting method. For more information on fiscal year ends and the accrual accounting method, go to Business income tax reporting.
To calculate your net income or loss, the CRA encourages you to use Form T2125, Statement of Business or Professional Activities. The CRA also accepts other types of financial statements.
If you use Form T2125, fill in the "Identification" section. At the "Industry code" box, enter the code for daycare: 624410.
Note
If you are filing your return electronically, use the industry code for daycare provided within your tax preparation software.
Enter your gross income from daycare on Form T2125, Statement of Business or Professional Activities, at amount 3A of Part 3A.
Your gross income includes all the income you earned from daycare services you provided during the year. This income includes payments from parents, as well as subsidies such as provincial or territorial grants to care for children.
If you received a grant to buy a daycare property, that amount is not part of your income. Instead, subtract the grant you used to buy the property from the capital cost of the property.
To calculate your net income, you generally deduct the expenses that you incur to earn income from your daycare services from the gross income that you earn from those services.
If you do not report an amount equal to or greater than $500 that is required to be included in computing your income on your return in a tax year and any of the three previous tax years, the CRA will charge you a penalty.
If you fail to report an income after your first omission, the penalty is the lesser of:
- 10% of the amount you did not report on your return for the tax year
- 50% of the difference between the understated tax payable (and certain overstated refundable tax credits) related to the amount you did not report and the amount of tax withheld related to the amount you did not report
A different penalty may apply if you knowingly, or under circumstances of gross negligence, have made or have participated in the making of a false statement or omission on your income tax return. The penalty is the greater of either $100 or 50% of the amount of understated tax.
For more information, go to Report business income and expenses.
Note
If you are charged a penalty for making a false statement or omission, you cannot be charged a penalty on the same amount for failing to report income.
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