Tax Tip Thursday

This week continues on the topic of bookkeeping, and is about e-commerce websites and 3rd party payment processors.

Are you earning money through digital platforms like apps or websites?

Whether you’re offering services, selling products, or renting properties, it’s essential to understand Canada’s new Reporting Rules for Digital Platform Operators.

As of 2024, these platforms may now be required to report your income to the Canada Revenue Agency (CRA). This change affects anyone who earns income through online activities, making accurate record-keeping and tax compliance more crucial than ever.

What Does This Mean for You?

The CRA’s new regulations aim to improve tax compliance and ensure that all income earned through digital platforms is reported correctly. If you use platforms like ride-sharing apps, freelance marketplaces, or e-commerce sites, you may need to provide your tax information to the platform. This data is then sent to the CRA, making it easier for the government to track your income.

We all know them – Ebay, Amazon, Shopify, are the biggest ecommerce. Air BnB on the rental property side of the equation and of course, Uber on the ride sharing. Some of these companies are now collecting HST on your behalf or just collecting and not necessarily on your behalf. It is important to know exactly what is happening. ot all the companies are behaving in the same manner and it absolutely affects you whether you like it or not!

The 2 most important and least understand aspects of these platforms is the bookkeeping and tax responsibilities for HST and Interprovincial taxes.

How to Prepare

1. Keep Detailed Records: This is where the bookkeeping comes in! You need to maintain accurate records of all your transactions, expenses, and payments received through digital platforms. This includes the source of the purchases and/or where products are shipped too. Each of the platforms have different reporting available online. Many of them will now integrate with quickbooks allowing us to set up your books to ensure all your different taxes are captured properly.
2. Provide Tax Information to Platforms: Make sure your tax information is up-to-date with any platform you use to earn income. Failing to do so could lead to penalties or issues with your tax return. Again – very important, ESPECIALLY if you are registered for HST. The platform needs to have that information so that they are NOT collecting HST on your behalf. It needs to be part of your invoicing.
3. Watch for Phishing Scams: Be cautious of any emails or messages asking for personal information. The CRA will never ask you to provide personal details through email or text.

Why It Matters

Accurate reporting of your digital income is not just about accurate bookkeeping; it is about ensuring you’re compliant with Canadian tax laws. Misreporting or failing to report income can result in fines, interest, and other penalties, which can add up over time. Additionally, staying on top of these requirements can help you take advantage of any deductions or credits you may be eligible for, ultimately reducing your overall tax burden.

If you are earning through digital platforms, take the time to understand these new reporting rules. It’s a proactive step to avoid future headaches and ensure that you’re meeting all your tax obligations.

Many entrepreneurs dive into these online platforms with the great opportunities available to us. It is so important to know where the people are buying your product from, the provincial (or international) tax requirements and how to deal with all of it from both a reporting and tax perspective.

We have a number of clients that we have set up to deal with all of this. It is specialized bookkeeping and you need to ensure it is done properly or you will definitely pay the price later. The CRA is watching!

New to Digital Income?

The Mad Accountant can help you keep more of your money in your pocket! Make sure to give us a call — no such thing as too soon. 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.