Part 2 - Professional income

Tick the box in Part 2 to indicate that you have professional income.

You should complete this part only if you have professional income. If you have business income, leave this part blank and complete Part 1. If you have both professional and business income, you must complete a separate Form T2125, Statement of Business or Professional Activities, for each.

Usually, you calculate your income from professional activities using the same rules as for a business. However, some aspects of professional activities are different from those of other types of businesses. Some of these differences are discussed below.

• Line D - Professional fees
• Line F - Adjusted professional fees

Line D - Professional fees

Your professional income includes all fees you receive for goods or services you provide, whether you receive or will receive money, something the same as money (such as credit units that have a notional monetary value), or something from bartering. Bartering occurs when two people agree to exchange goods or service without using money. For more information, see Interpretation Bulletin IT-490, Barter Transactions.

As a professional, your income generally includes the value of your work-in-progress (WIP). WIP is goods or services that you have not yet completed at the end of your fiscal period.

Your professional fees for the current year are the total of:

• All amounts you received during the year for professional services, whether you provided the services before or during the current year or after your current year-end;

Plus:

• all amounts receivable at the end of the current year for professional services you provided during the current year; and
• the value of your WIP at the end of your current year for which you have not received any amount during the year;

Minus:

• all amounts receivable at the end of your previous year-end; and
• the value of your WIP that was included in professional fees at the end of your previous year.

The result is the amount you enter at line D.

If you usually deduct GST and PST, or HST directly from your professional fees when you earn them, you can show your net professional fees (after GST and PST, or HST) on line D. Then, do not enter the GST and PST, or HST deducted on the following line. If GST and PST, or HST are not deducted directly from your professional fees, show GST and PST, or HST separately on the appropriate line.

Report the 1% credit on eligible professional fees (maximum $300) that you claimed on line 107 of Form GST34, Goods and Services Tax/Harmonized Sales Tax Return for Registrants, on line 8230 in Part 3 of Form T2125.

For more information about the Quick Method and examples of how it works, see Guide RC4058, Quick Method of Accounting for GST/HST.

Election to exclude your WIP

You can choose to exclude your WIP when you calculate your income if you are one of the following professionals:

• an accountant;
• a dentist;
• a lawyer (including a notary in Quebec);
• a medical doctor;
• a chiropractor; or
• a veterinarian.

If you did not choose to exclude your WIP in any previous year, you can do so this year. You do not need a special form to do this. Attach a letter to your income tax return telling us that you want to exclude your WIP.

You can also exclude your WIP by doing the following:

• On the "Work-in-progress, end of the year" line, write the amount you included as "Work-in-progress, end of the year" in your professional fees on line D.
• One the "Work-in-progress, start of the year" line, write the amount of your WIP at the start of the year, if you excluded it at the end of last year.

Make this election when you file the original income tax return to which it relates. We will not accept an election when you file an amended return.

For partnerships, an authorized partner must choose to exclude the partnership's WIP on behalf of all partners.

The choice to exclude WIP stays in effect for each following year, unless you file an application and we let you make the change. For more information, see Interpretation Bulletin IT-457R, Election by Professionals to Exclude Work in Progress from Income.

Line F - Adjusted professional fees

Enter your professional fees plus your WIP for the start of the year if you excluded it at the end of last year, minus any GST and PST, or HST included in your fees, and your WIP at the end of the year if you elect to exclude it.

Enter this amount on line 8000 in Part 3 on page 1 of Form T2125.

Forms and publications

• Guide RC4058, Quick Method of Accounting for GST/HST
• Guide T4002, Business and Professional Income
• Form T2125, Statement of Business or Professional Activities
• Form GST34, Goods and Services Tax/Harmonized Sales Tax Return for Registrants
• Interpretation Bulletin IT-457R, Election by Professionals to Exclude Work in Progress from Income
• Interpretation Bulletin IT-490, Barter Transactions