CPP contributions for owner of sole proprietorship

Tax Topics
1

Owner of a business is filing 2021 and 2022 taxes late (being filed now).

They have CPP contributions payable on self-employment income for both yrs.

  1. Can these amounts be expensed on Line 9060 – Salaries, wages and benefits (including employer’s contributions)** on the T2125?

  2. Should CPP amounts payable from each year be expensed on its tax year ($3k in CPP owed for 2021 gets expensed on the 2021 return) or should all CPP payable amounts be expensed in 2023 (the year the returns are filed and the CPP amounts will be paid)?

2

Personal taxes do not show up on a T2125, just as they don’t show up on proprietorship financial statements. If you look through the tax return after entering the T2125 details, you will see part of the CPP is deducted on schedule 1 as a non-refundable tax credit on line 310, and part is deducted from taxable income on line 222. So, it does get deducted, just not on the T2125.

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3

As a self-employed, he must pay CPP for the employee’s and employer’s portions. Once the T2125 information is completed, TC will calculate the proper CPP amount and credit for the employer’s portion.

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