Entrepreneurship & Small Business

How to report net loss to CRA for new business

  • Last Updated:
  • Apr 8th, 2019 11:38 am
[OP]
Newbie
Dec 10, 2018
5 posts

How to report net loss to CRA for new business

In 2018 I started to sell a product online. I had a net loss of around USD 3000 (I dealt in USD), from paying more to buy the product & advertise, than earning in sales.

How can I report the loss to the CRA to maximize rebate? In case carrying tax back or forward will maximize, I'll be making more in 2019 from my full-time job than either in 2017 or 2018.
7 replies
Deal Addict
Feb 5, 2009
2808 posts
932 upvotes
Newmarket
If it's a sole proprietor you will claim it as business loss on T2125 of your personal income tax, and the loss will reduce your total income in the year with the exception of home office expenses which will be carried forward to future years.

The answer will be different if you are incorporated.
[OP]
Newbie
Dec 10, 2018
5 posts
Thanks!

I haven't registered it as a business yet, so I assume it's a sole proprietorship.

So you're saying that to maximize tax rebate, I should:
- claim business loss for 2018
- carry forward home office expense for 2019?
Banned
Mar 30, 2019
18 posts
9 upvotes
do you have income from this business?
If yes, then sure, you can write down the losses from your income.
If no, then nothing.
Deal Addict
Feb 5, 2009
2808 posts
932 upvotes
Newmarket
libertyv wrote: do you have income from this business?
If yes, then sure, you can write down the losses from your income.
If no, then nothing.
nope, that is not correct. If you have no sales you can still apply the loss from the business to other income, it depends on other factors, for example it can happen if you have started the business towards the end of the year, had expenses but have not had any sales yet, and there are expectations of sales and the profit in the following years.
Jr. Member
Oct 27, 2018
123 posts
52 upvotes
A negative cash flow does not mean you have a net loss. Since you bought too much product, it sits as inventory and flows through your cost of good sold when sold. Also, are you paying advertising fee to a non-Canadian advertising company? My understand is that an ad fee paid to a non Camadian advertising company may not be fully or partially deductible.
Deal Addict
Feb 5, 2009
2808 posts
932 upvotes
Newmarket
s7yl3x wrote: . Also, are you paying advertising fee to a non-Canadian advertising company? My understand is that an ad fee paid to a non Camadian advertising company may not be fully or partially deductible.
Unfortunately that is not correct either. An expense is deductible in the same manner if paid for Canadian or foreign company.
Jr. Member
Oct 27, 2018
123 posts
52 upvotes
Homerhomer wrote: Unfortunately that is not correct either. An expense is deductible in the same manner if paid for Canadian or foreign company.
Under what provision are you taking a deduction?

Just make sure you’re on side with s.19.1(1) of the ITA, when taking this ad deduction.

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