Preparing your Small Business and Self Employed Tax Return with UFile Tax Software
Unincorporated Small Business and Self Employed owners are fortunate to be around at a time where preparing tax returns have been significantly simplified. Not only are calculations automated, but contemporary tax software provide interfaces which make input of data fairly straightforward. Tax software also help taxpayers to optimize their deductions, so preparing your own small business taxes has never been easier. Of course tax software is still only a tool and is not a replacement for tax expertise. Business owners should be cautioned that, when in doubt, it is always best to consult with an an accountant.
UFile is available as an online version or a Windows desktop download. As of 2024:
UFile Online starts at $20.95 for individuals and $13.00 for a spouse. There's no additional charge for dependants.
UFile for Windows is priced at $25.95, and it lets you prepare up to 4 returns, with 4 more available for low-income individuals. (Unfortunately, a Mac version is still not available.)
Both versions support the T2125 - Statement of Business or Professional Activities, used to report income and expenses for self-employed individuals, sole proprietors, and unincorporated partnerships. You can also import prior-year data, even from other software like TurboTax.
The interface is quite straightforward. You are taken through an interview where you enter all your personal data and check the types of income and deductions that apply to you. Once completed it creates a series of pages that need to be filled out with relevant information. If you have checked the self employed business or partnership income, the software will create a “self employment income” section with several subsections:
Want to Simplify Your Taxes?
📝 Stay Organized
Get your free Small Business Tax Return Checklist to help you gather everything you need and avoid missing key deductions.
📘 Learn the Essentials
Check out my book Small Business Tax Facts for clear, practical guidance on Canadian small business taxes written specifically for self-employed individuals and sole proprietors.
🎥 Need a Walkthrough?
Watch my T2125 Tax Return Masterclass to gain a better understanding and feel more confident about completing your small business/self-employment tax return
Entering Your Business Details
The first section asks for your business information. If you haven’t registered a business name, you can simply use your personal name. The fiscal period start and end dates typically default to the calendar year. You'll also be asked to select an industry code—click the question mark beside the field to search for the category that best fits your business. Other fields on this page are generally optional.
Reporting Income and Expenses
The next step is to input your revenue and business expenses, which you can usually pull from your accounting software or spreadsheets. While you can enter your total income, expenses must be entered by category so it is important to be specific and consistent with your categories. Note that home office expenses, vehicle expenses, and depreciation (CCA) are entered on separate pages.
Home Office Expenses
UFile provides a list of common home office expenses. You can also enter items like rent, condo fees, or other shared costs under “Other.” Be sure to enter the personal-use percentage, which is typically calculated by dividing the square footage of your home office by the total square footage of your home. UFile will then apply this to your expenses and automatically calculate your claim.
CCA (Capital Cost Allowance)
CCA allows you to deduct a portion of larger purchases like computers, office furniture, or equipment. Generally speaking, you can’t deduct the full cost in one year since these are long-term assets (although there is an exception for 2024 where sole proprietors may deduct 100% for some assets that were purchased and used during the year).
CRA sets rates for each asset class, and UFile walks you through the process by providing a list of common categories. Note that the most common CCA classes are:
Class 8 20% Furniture, fixtures, equipment, tools, and some electronics not covered by another class. This is a common “catch-all” class.
Class 10 30% Vehicles (automobiles, vans, trucks) that generally cost under $36,000+ tax in 2024.
Class 10.1 30% (no half-year rule on disposal) Passenger vehicles costing more than $36,000 in 2024. Each vehicle is in its own class.
Class 12 100% Small tools, computer software (off-the-shelf), and some temporary structures.
Class 13 Varies Leasehold improvements amortized on a straight line basis over the remaining term of the lease + one renewal period.
Class 50 55% Computer hardware and systems software acquired after March 18, 2007.
If you're disposing of assets or unsure of which class to use, it's a good idea to check with an accountant.
Keep in mind that CCA and home office expenses can only be deducted up to your business income—they can’t create or increase a loss. If you do have a loss from your where your regular business expenses exceed your income, however, you can use it to reduce other sources of income.
Reviewing and Filing
Once everything is entered, you can click the Results tab to review your taxes payable and identify any errors or omissions. UFile’s error-checking feature is helpful for catching missing or inconsistent information.
When ready, you can NETFILE your return directly through UFile. For self-employed individuals, the deadline is June 15, but any balance owing must be paid by April 30 to avoid interest. While you don’t need to send documents when filing, CRA may request proof later, so it's important to keep all receipts, records, and supporting documentation (invoices, bank statements, etc.).
Using tax software like UFile can be a cost-effective way for sole proprietors and freelancers to prepare their returns and better understand their tax obligations. But if you’re unsure about any part of the process or want to ensure you're maximizing deductions, I recommend speaking to an accountant.
Want to Simplify Your Taxes?
📝 Stay Organized
Get your free Small Business Tax Return Checklist to help you gather everything you need and avoid missing key deductions.
📘 Learn the Essentials
Check out my book Small Business Tax Facts for clear, practical guidance on Canadian small business taxes written specifically for self-employed individuals and sole proprietors.
🎥 Need a Walkthrough?
Watch my T2125 Tax Return Masterclass to gain a better understanding and feel more confident about completing your small business/self-employment tax return
