T1139FA Forms: 1   Federal forms: 

Protected B when completed
 
  Reconciliation of 2023 Business Income for Tax Purposes  
 
General information Use this form if you are a self-employed business person, including a self-employed commission salesperson, a professional, a farmer, or a fisher, and you:
  • started your business in 2022 or 2023 and are electing to use the alternative method to have a fiscal period that does not end on December 31, effective for the first fiscal period of your business
  • already elected to have a fiscal period that does not end on December 31 and are calculating your additional business income. This is mandatory if you have made this election. Fill in all the information in Part 2 that applies.
  • are cancelling your previous election and are now going to use a fiscal period that ends on December 31. Fill in all the information in Part 5 that applies.
  • are calculating your business or professional income to report on your 2023 income tax and benefit return

Who can elect to use the alternative method

The alternative method is only available, on a per business basis, for businesses carried on in Canada by individuals or partnerships of which all the partners are individuals.

If you are a goods and service tax/harmonized sales tax (GST/HST) registrant, your choice of the fiscal period end for income tax purposes may affect your GST/HST reporting periods, filing, and balance due dates.

You cannot use the alternative method if:

  • you are in partnerships that are partners in other partnerships
  • you are an individual who is a partner in a partnership that includes a professional corporation as a partner
  • the expenditures made in the course of carrying on the business are primarily the cost or capital cost of tax-shelter investments
  • you have already elected to use the alternative method and then cancelled the election

How to fill in this form

Fill in Part 2 only if you are electing or you have already elected to have a fiscal period that does not end on December 31. We refer to this as the alternative method. If you are cancelling your previous election and are now going to use a fiscal period that ends on December 31, fill in all the information in Part 5 that applies.

You must fill in this form and send it with your income tax and benefit return to calculate your additional business income for as long as your fiscal period does not end on December 31.

If you need to calculate an additional business income for a separate business, fill in another Form T1139 for each one.

Filing and balance due dates related to this form

Generally, as an individual you have until April 30, 2024, to file your 2023 income tax and benefit return. However, if you have self-employed income, you have until June 15, 2024, to file your 2023 T1 tax return. In both cases, any tax owing must be paid by April 30, 2024.

To have a fiscal period that does not end on December 31, you have to send this form with your your income tax and benefit return as follows.
If you started your business in:

  • 2022 and your first fiscal period ended in 2023, but you did not fill in this form nor reported business income in 2022, you must fill in the form with your 2023 income tax and benefit return
  • 2023, your first fiscal period ends in 2024, and you decide to report your business income in your 2023 return, fill in this form to request an election for your 2023 income tax and benefit return
  • 2023, your first fiscal period ends in 2024, and you will report a business income for the first time in 2024, fill in this form to request an election for your 2024 return

If the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, we consider your payment to be on time if we receive it on the next business day. Your return is considered on time if we receive it or if it is postmarked on or before the next business day.

 

2
  Protected B when completed
Part 1 - Identification
  Your name: Social insurance number (SIN)
  Demo EachTax
  Business name: Business number (15 characters) (if applicable)
 
         

Part 2 - Alternative method - Fiscal periods that do not end on December 31

Part 2 will help you calculate your additional business income to report on your 2023 income tax and benefit return.

Once you elect to have a fiscal period that does not end on December 31, you do not have to do it again for that business.

For a final income tax and benefit return in case of death of a partner or a proprietor, complete Part 3 – Alternative method – Death of a proprietor.

For more information on amount A or if you are a partner in a partnership, see Part 7 - Notes.

 
 
Net income (loss) for your fiscal period ending in 2023 (if applicable)       A 
 
Additional business income based on your fiscal year-end period. Use only one of the formulas below.
Enter the result at amount D (if the amount you calculate with the formula is negative, we consider it to be nil)
 
Additional business income if your fiscal period ends is in 2023
 
Total of amount A considered to be a taxable capital gain for the capital gains deduction   2A
Your total capital gains deduction for 2023   2B
Amount 2A or 2B, whichever is less     2C
Amount A minus amount 2C     2D
 
Number of days in 2023 you carried on the business after your fiscal period ending in 2023 up to December 31, 2023   2E
Number of days in 2023 you carried on the business in your fiscal period ending in 2023   2F
Amount 2E divided by amount 2F     2G
Amount 2D multiplied by amount 2G      B 
 
For an example of how to calculate amount B, see Part 7 – Notes.
 
 
Additional business income if your business started in 2023 and your fiscal period ends in 2024
 
Enter at amount C the lesser of any amount you designate as your additional business income or the result of the following formula.
If the net income for the fiscal period ending in 2024 is unknown, use reasonable estimated amounts.
 
Net income for the fiscal year ending in 2024.      2H
 
Total of the net income considered to be a taxable capital gain for the capital gains deduction   2I
Your total capital gains deduction for 2024   2J
Amount 2I or 2J, whichever is less     2K
Amount 2H minus amount 2K     2L
 
Number of days in 2023 that the business is carried on in the fiscal period ending in 2024   2M
Number of days the business is carried on that are in the fiscal period ending in 2024   2N
Amount 2M divided by amount 2N     2O
Amount 2L multiplied by amount 2O      C 
 
For an example of how to calculate amount C, see Part 7 – Notes.
                           
 

3
  Protected B when completed
Part 3 - Alternative method - Death of a proprietor

Software restrictions:

Tax return for taxpayer died in 2023 or 2024 is not eligle for NetFILE and is not supported. For more information, please visit the CRA web site

Death of a partner or proprietor

In the case of the death of a partner or a proprietor, there are timing issues to consider when reporting income and completing the final income tax and benefit return.

If the partner or proprietor died after the end of the business fiscal period, his legal representative can choose to fill in an optional income tax and benefit return. This means the representative will fill in two sets of returns and two T1139 forms for the 2023 year:

  • A final income tax and benefit return and Form T1139 to report the business income for the regular fiscal period as well as all other income
  • An optional income tax and benefit return and Form T1139 to report the business income from the short fiscal period that is immediately after the end of the regular fiscal period to the death of the partner or proprietor.

Final income tax and benefit return for the regular fiscal period and this form

In this case, the final income tax and benefit return includes the business income from the regular fiscal period and all other income. The legal representative fills in the financial statements and this form. Fill in the form for the regular fiscal period as follows:

 
Net income (loss) for your fiscal period ending in 2023 (if applicable)       A 
 
Total of amount A considered to be a taxable capital gain for the capital gains deduction   3A
Your total capital gains deduction for 2023   3B
Amount 3A or 3B, whichever is less     3C
Amount A minus amount 3C     3D
 
Number of days the business is carried on after the end of the 2023 fiscal period, up to and including the date of death   3E
Number of days the business is carried on that are in the regular fiscal period ending in 2023   3F
Amount 3E divided by amount 3F     3G
Amount 3D multiplied by amount 3G     3H
Enter amount 3H at amount D below.
                           
Optional income tax and benefit return, plus this form, for the short fiscal period

The optional income tax and benefit return includes the business income for the short fiscal period. The legal representative fills in the financial statements and this form for the time from the end of the regular fiscal period until the date of death. Fill in the form for the short fiscal period as follows:

  • At amount A, enter the net income (loss) from the end of the regular fiscal period until the date of death
  • At amount F, enter the additional business income from amount D of the Form T1139 for the final income tax and benefit return

For more information about filing returns for deceased persons, see Guide T4011, Preparing Returns for Deceased Persons.


Part 4 - Final net income (loss) of the business
 
Additional business income: Enter either amount B, C or 3H based on the formula that was used above.       D 
Subtotal: Amount A plus amount D       E 
Last year's additional business income: Enter amount D from last year's Form T1139       F 
 
Net income (loss) of the business: Amount E minu F - Report this amount on the appropriate line of your income tax and benefit return.       G 
                           
Report amount G as self-employment income on your return:
  • For business income, enter it at line 13500.
  • For professional income, enter it at line 13700.
  • For commission income, enter it at line 13900.
  • For farming income, enter it at line 14100.
  • For fishing income, enter it at line 14300.
 

4
  Protected B when completed
Part 5 - Changing back to a fiscal period ending on December 31

Part 5 applies only to businesses that started before 2023 and that sent this form with their income tax and benefit return last year.

If you cancel your previous election so that your fiscal period now ends on December 31, you have to report your business income on a calendar-year basis in later years. Once you have changed your fiscal period end to December 31, you cannot change it back.

For more information on amount H and I or if you are a partner in a partnership, see Part 8 – Detailed information.

 
Net income (loss) for your first fiscal period that ends between January 1, 2023 and December 30, 2023       H 
Net income (loss) for the period that starts after the end of your first fiscal period in 2023, and up to December 31, 2023       I 
Subtotal: Amount H plus amount I        J 
For more information on amounts H and I, see Part 8 – Detailed information.
 
Last year's additional business income: Enter amount D from last year's Form T1139       K 
Net income (loss) of the business: Amount J minu K - Report this amount on the appropriate line of your income tax and benefit return.       L 
                         
Report amount L as self-employment income on your income tax and benefit return:
  • For business income, enter it at line 13500.
  • For professional income, enter it at line 13700.
  • For commission income, enter it at line 13900.
  • For farming income, enter it at line 14100.
  • For fishing income, enter it at line 14300.

Part 6 - Certification
 
Indicate your choice by ticking the box that applies to you:
I choose to have a fiscal period that does not end on December 31.
 
I have already elected to have a fiscal period that does not end on December 31 and I am using the form to calculate my additional business income to declare on my 2023 T1 tax return.
 
I am cancelling my previous election to have a fiscal period that does not end on December 31 in order to have a fiscal period ending on December 31.
 
First name   Last name  
Demo   EachTax  
 
Title   Telephone number    
   
 
I certify that the information given on this form is correct and complete.
Signature Date (YYYYMMDD)  
   
           

Personal information (including the SIN) is collected to administer or enforce the Income Tax Act and related programs and activities including administering tax, benefits, audit, compliance, and collection. The information collected may be used or disclosed for purposes of other federal acts that provide for the imposition and collection of a tax or duty. It may also be disclosed to other federal, provincial, territorial, Indigenous or foreign government institutions to the extent authorized by law. Failure to provide this information may result in paying interest or penalties, or in other actions. Under the Privacy Act, individuals have a right of protection, access to and correction of their personal information, or to file a complaint with the Privacy Commissioner of Canada regarding the handling of their personal information. Refer to Personal Information Bank CRA PPU 005 on Information about Programs and Information Holdings at canada.ca/cra-information-about-programs.

 

5
  Protected B when completed
Part 7 - Notes

Amount A

If you have more than one fiscal period that does not end on December 31 for the same business, amount A is the total of the net income (loss) of these fiscal periods. For example, if you had a regular fiscal period ending on May 31, 2023, and then ceased to do business and retired on July 31, 2023, you would have a second fiscal period ending July 31, 2023.

You can find the net income (loss) amount you need to enter at amount A from your income and expenses statement for the fiscal period ending in 2023.

If you started your business in 2023, leave this field blank. Your net income (loss) is the amount found on line 9946 on the following forms:

  • T2125, Statement of Business or Professional Activities
  • T2121, Statement of Fishing Activities
  • T2042, Statement of Farming Activities
  • T1163, Statement A - AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals
  • T1164, Statement B - AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Additional Farming Operations
  • T1273, Statement A - Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Inidividuals
  • T1274, Statement B - Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Additional Farming Operations

If you are a partner in a partnership

A partner who has authority to act for a partnership can make the request to have a fiscal period that does not end on December 31. In this case, all partners in the partnership must fill in a copy of Form T1139 and send it with their income tax and benefit return (T1 tax return) to provide details of their net business income (loss) share.

Enter at amount A your share of the partnership's net business or professional income (loss) for the fiscal period ending in 2023. If you have deductible expenses from your share of the net partnership business income (loss), subtract these amounts before entering your share.

If you received a T5013 slip, Statement of Partnership Income, and you did not make adjustments to the amount in box 116, 120, or 122, enter the amount at amount A for the fiscal period ending in 2023. However, if you made adjustments to the amount in box 116, 120, or 122, enter the amount from line 9946 on the form that applies to your type of business income. See "Amount A" above for a list of the forms.

Examples to calculate the additional business income (amounts B and C)

Amount B - Your business started before 2023

Karim owns a roofing business with a fiscal period from April 1 to March 31. Karim's net income from the business for the fiscal period ending on March 31, 2023, is $45,000. He enters his net income of $45,000 at amount A of his Form T1139. The business does not have income from the disposition of property. Karim will complete the first formula in Part 1B as follows to calculate amount B since his fiscal period ends in 2023:

( 45,000
(Amount A)
- 0.00
(since he has no income from disposition of property)
) x 275 (the number of days in 2023 that are after his fiscal period ending in 2023, so from April 1, 2023, to December 31, 2023
----------------------------------
365 ((the number of days in the fiscal period ending in 2023
=  B       

Amount C - Your business started in 2023

Karim started a roofing business with a fiscal period that started on April 1, 2023, and ends on March 31, 2024. Karim's estimated net income from the business for the fiscal period ending on March 31, 2024, is $45,000. The business does not have income from the disposition of property. Karim will complete the second formula in Part 1B as follows to calculate amount C since his first fiscal period ends in 2024 and he decided to declare part of his business income on his 2023 income tax and benefit return:

( 45,000
(estimated net income for the fiscal period ending in 2024)
- 0.00
(since he has no income from disposition of property)
) x 275 (the number of days of his fiscal period that are in 2023, so from April 1, 2023, to December 31, 2023
----------------------------------
365 (the number of days in the fiscal period ending in 2024)
=  C 
 

6
  Protected B when completed
Part 8 - Detailed information

Amounts H and I

You can find the net income (loss) amount you need to enter at amount H from your income and expenses statement for the fiscal period ending before December 31, 2023, and at amount I from your income and expenses statement for the fiscal period ending on December 31, 2023. You need a separate income and expense statement for each fiscal period. Please see "Additional information for amount I" below. Your net income (loss) is the amount found on line 9946 on the following forms:

  • T2125, Statement of Business or Professional Activities
  • T2121, Statement of Fishing Activities
  • T2042, Statement of Farming Activities
  • T1163, Statement A - AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals
  • T1164, Statement B - AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Additional Farming Operations
  • T1273, Statement A - Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Inidividuals
  • T1274, Statement B - Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Additional Farming Operations

If you are a partner in a partnership

A partner who has authority to act for a partnership can make the request to return to a fiscal period that ends on December 31. In this case, all partners in the partnership must fill in a copy of Form T1139 and send it with their income tax and benefit return (T1 tax return) to provide details of their net business income (loss) share.

Amount H

Enter at amount H your share of the partnership's net business or professional income (loss) for the first fiscal period ending in 2023. If you have deductible expenses from your share of the net partnership business income (loss), subtract these amounts before entering your share.

If you received a T5013 slip, Statement of Partnership Income, and you did not make adjustments to the amount in box 116, 120, or 122, enter the amount at amount H for the first fiscal period ending in 2023. However, if you made adjustments to the amount in box 116, 120, or 122, enter the amount from line 9946 on the form that applies to your type of business income. See "Amounts H and I" above for a list of the forms.

Amount I

Enter at amount I your share of the partnership's net business or professional income (loss) of your fiscal period ending December 31, 2023. For example, if your first 2023 fiscal period ended on June 30, 2023, enter at amount I the net income (loss) for the period of July 1, 2023, to December 31, 2023. You must prepare a separate income and expense statement for this period.

If you have deductible expenses that relate to this income that you did not deduct at amount H, subtract them before entering your share of the net partnership income (loss) for this period.

If you received a T5013 slip and you did not make adjustments to the amount in box 116, 120, or 122, enter this amount at amount I for the fiscal period ending on December 31, 2023. However, if you made adjustments to the amount in box 116, 120, or 122, enter the amount from line 9946 on the form that applies to your type of business income. See "Amounts H and I" above for a list of the forms. Please see "Additional information for amount I" below.

 

7
  Protected B when completed
Part 8 - Detailed information (continued)

Additional information for amount I

Generally, you calculate the income and expenses of your fiscal period ending on December 31, 2023, the same way as your first fiscal period ending in 2023. You have to consider the following items:

  • Reserves: Add any reserves you deducted in your fiscal period ending in 2023.
  • Opening inventory and closing inventory: The opening inventory is the amount of the closing inventory of your fiscal period ending in 2023. Similarly, the closing inventory as of December 31, 2023, will be the opening inventory for your 2024 fiscal period.
  • Work-in-progress (WIP): The WIP at the beginning of your fiscal period is the amount of the WIP at the end of your fiscal period ending in 2023.
    However, if you have a tax year that begins after March 21, 2019, you can no longer elect to exclude amounts for WIP. If you elected to use billed-basis accounting for the last tax year that started before March 22, 2019, the new proposed transitional rules allow you to include your WIP into income progressively.
    Generally, for the first tax year that starts after March 21, 2019, you must include 20% of the lesser of the cost and the fair market value of WIP. The inclusion rate increases to 40% in the second tax year that starts after March 21, 2019, 60% in the third year, 80% in the fourth year, and 100% in the fifth and all subsequent tax years. For more information, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
  • Business-use-of-home expenses: You can claim any deductible business-use-of-home expenses you could not use in the previous fiscal period ending in 2023. Similarly, you can carry forward to your 2024 fiscal period any deductible business-use-of-home expenses you could not use in your fiscal period ending on December 31, 2023.
  • Capital cost allowance (CCA): The undepreciated capital cost (UCC) of the depreciable property at the start of your fiscal period is the UCC at the end of the first fiscal period ending in 2023. Similarly, the UCC at the end of your fiscal period ending on December 31, 2023, is the UCC a the start of your 2024 fiscal period.
    For your fiscal period ending on December 31, 2023, you have to prorate your maximum claim for CCA based on the number of days in that fiscal period.
    For example, if your fiscal period ending on December 31, 2023, is 214 days, and you would normally calculate your maximum CCA to be $3,500 for a full year, the maximum amount of CCA you can claim is $2,052, that is to say $3,500 × 214 ÷ 365.

For more information on the items above, see guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

For more information on CCA, see the Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance, and the guide that applies to your type of business income:

  • T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income
  • RC4408, Farming Income and the AgriStability and AgriInvest Programs Harmonized Guide
  • RC4060, Farming Income and the AgriStability and AgriInvest Programs Guide

Example to fill in amounts H and I

Karim filed an election when he started his roofing business to have a fiscal period from April 1 to March 31. In 2023, he decides to cancel his election in order to have his fiscal period end on December 31 for 2023 and later years. This means that Karim will have two fiscal periods in 2023, the first fiscal period from April 1, 2022, to March 31, 2023, and a short fiscal period from April 1, 2023, to December 31, 2023. Karim's net income from the business is $45,000 for the first fiscal period and $30,000 for the short fiscal period. He enters $45,000 at amount H and $30,000 at amount I.