Tax Tip Thursday

Stay on the right side of the CRA if you are a gig worker!

A new survey estimates 7.4 million Canadian adults are part of the gig economy, generating 24 per cent of the country’s income.
It finds the number of Canadians doing freelance or contract work, delivery or ride-share services, homestay rentals and selling products online has increased by 85 per cent since the 2020 Covid pandemic.

The Canada Revenue Agency (CRA) has taken note of the growing army of gig workers by now requiring online platforms to report user’s income.

Regardless, the survey also finds over one-third of gig worker surveyed are either unclear of the tax implications for gig income or, “not inclined to report all gig income.”

In any case, the CRA considers it income and that could spell trouble for gig workers who don’t declare it. The survey finds 27 per cent of gig workers did not file last year and 32 per cent do not plan to file any gig-related income this year.

Filing as a business!

First, it’s important to understand that a side gig is considered a business entity for tax purposes and requires additional schedules to be prepared on your T1 personal return.
While gig workers don’t receive T4s, they might receive a T4A slip from the platform they use. If not, they must track and report earnings and expenses annually.

If gig earnings exceed $30,000 over four consecutive calendar quarters, a GST/HST/QST registration number is required.

While full-time workers are required to file their 2024 returns by April 30, gig workers have until June 16.

Monthly or quarterly payment installments can be set up with the CRA to avoid large tax bills.

Home office deductions:

The CRA-approved method for calculating home office expenses permits a portion of home utilities including electricity, heat, water, insurance, property taxes, mortgage interest, and repairs and maintenance to be deducted from taxable income.

The portion is based on the square footage of the home office in relation to the total square footage of the home. If, for example, the office space is one-fifth of the home, twenty per cent of eligible household expenses can be deducted from the business income.

Vehicle deductions

If you use your own vehicle to generate income, you can deduct the work-related portion of costs. Those expenses include repairs and maintenance, vehicle insurance, license fees, fuel, lease or depreciation if you own the vehicle.

Document your usage and expenses in a logbook. You need to be able to substantiate any of the claims that you make.  You can claim a percentage of the expenses relative to the percentage your drove for business in the year. They suggest recording the vehicle’s odometer reading at the beginning and end of each year.

The key to defending yourself against the CRA is documentation. You have to have all the right documentation in place if they ask. If you are claiming expenses, makes sure you have the receipts!

And last but not least.

This has been a terrible year for receiving and retrieving your T3’s, 4’s, 5’s, etc…. There does not seem to be rhyme or reason and it is totally out of our control as tax preparers.
Please ensure that you check your tax return to ensure all your income is on there. If you have investments – confirm with your investment advisor that you have everything.

There are going to be a LOT of reassessments unfortunately this year, so do your best to avoid that problem by double checking now.

Gig work doesn’t have to be complicated – we can help navigate your new business venture!  Make An Appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.