I am self employed, earned annual client income e.g. Gross 70k; 10k was sub contracted. Turbo tax presents my net income of 70k however surely this should be 10k considering the sub contracting nature of my work? If I submit the sub contracted 10k in professional advice and services then I end up having to pay income tax on 5k. Surely this should be subtracted before Net Income is calculated? Where should this 10k get inputted so I don't end up paying personal tax on this 10k?
There is a spot where you can input your subcontracting expenses as Cost of Goods Sold.
Here’s how to edit your Form T2125 if you're using
TurboTax Online:
Click on “Self-Employment” under the Income tab.
Click “Continue” on the ‘Let's look at your self-employment income and expenses’ page.
Click “Edit” next to the business you want to work with.
Click “Income and inventory”.
Click “Skip Income”.
On the ‘did you sell products that you bought or manufactured?’ page, enter the amount you spent on subcontracting next to “Did you hire any Subcontracts?”.
Click “Continue” to save. Now your business net income should reflect the changes.
You can also click on the “Find” icon in the top right and search for “Self”. Select “Self-Employment” and then click the “Go” button.
Here’s how to edit your Form T2125 if you're using TurboTax CD/Download:
If you are using the EasyStep Interview method, click on the “Find” icon in the blue menu. Search for “Business”. Select “Business Profile” and then click the “Go” button.
Click “Continue” on the ‘Business Summary’ page.
Click “Edit” next to the business you want to work with.
Click “Continue” until you get to the ‘T2125 Cost of Goods Sold’ page. There you can put in the amount you spent on Subcontracts.
Click “Continue” to save. Now your business net income should reflect the changes.
If you are using the Forms method, click on the “Forms” icon in the blue menu. Search for “T2125”. Select “T2125 P1” and then click the “OK” button.
If you need more assistance and you are using TurboTax Live Assist & Review, you can talk to a tax expert:
Thanks you so much Susan for the response, unfortunately when I follow the steps you have recommended on Turbo Tax Online I don't get the screen ‘did you sell products that you bought or manufactured?’