Business income is the money or something the same as money that you get from any activity you do for profit.
I know it sounds awkward, but the point is that goods or services or credits you receive through bartering count as business income, too, even though no actual money changes hands. (See the Canada Revenue Agency's Interpretation Bulletin IT-490, Barter Transactions for more on this.)
You need to declare your business income on your Canadian income tax return, which you do by completing Form T2125 and then filling in your total income on the appropriate line of the T1 return.
If you fail to report all your business income, you may be subject to a penalty of 10% of the amount you failed to report after your first omission.
It gets worse; "if you knowingly or under circumstances amounting to gross negligence participate in the making of a false statement or omission on your income tax return. This penalty is 50% of the tax attributable to the omission or false statement" (Canada Revenue Agency).
Do You Have Business Income You're Not Declaring?
Some people get confused about the scope of business income. For instance, because they haven't registered a business, they think they don't have to fill out form T2125 and declare the business income when they're completing their T1 income tax form.
Or they think that because they haven't sold much, what they've done doesn't count as business income.
But all the money you make counts, and if you've sold items for profit (even just a few!) you're engaging in business activities according to the Canada Revenue Agency. (See Surprise! You're Running a Small Business for more on this.)
Remember, it's your total world-wide income that the government expects you to declare on your Canadian income tax - whether you made business income online or received a cheque from Bavaria. It all counts.
