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New tax implications for gig workers

Written by
Written by
Content Manager

Monique is the Content Manager for Debt.ca. An Accredited Financial Coach of Canada and established writer, she uses her skills to offer sound knowledge to those looking to escape financial overwhelm.

Monique Bourgeois, AFCC®
Gig workers

The gig economy is booming in Canada, with nearly 9 million Canadians (28%) participating in freelance, contract, or platform-based work. Whether you drive for a ride-sharing service, deliver food, sell crafts online, or offer your skills on a freelance basis, it’s essential to understand the evolving tax landscape that impacts gig workers’ income. Recent changes to Canada’s Income Tax Act, primarily through Bill C-47, are bringing greater transparency to the gig economy, and it’s crucial to stay informed to avoid penalties.

New reporting requirements for digital platforms

A significant change is that digital platforms are now required to report information about their workers’ income to the Canada Revenue Agency (CRA). This means platforms like Uber, Upwork, Instagram, Airbnb, Etsy, and DoorDash must collect and share user information and earnings with the CRA. This new legislation aims to ensure gig workers comply with tax obligations and to increase transparency within the gig economy.

Report details

Gig platforms must file an information return with the CRA by January 31 of the year following the calendar year in which the income was earned. For example, income earned in 2024 will be reported by January 31, 2025. Information returns will include gig workers:

  • Full name
  • Date of birth
  • Primary address
  • Tax identification number (AKA SIN)
  • Income earned for the year

Platforms must also provide their workers with a copy of the information they report to the CRA. This is to help ensure that gig worker records align with what the platform is reporting.

The risks of not declaring income

Especially given the current economic climate and the rising cost of living it can be tempting to minimize or avoid declaring gig income. According to a survey by H&R Block, 43% of gig workers said they were willing to risk not declaring all of their gig income, and 32% were willing to risk not declaring any of their income. These new regulations have made this a much riskier proposition.

Not declaring all income is effectively breaking the law and, therefore, carries significant risks. The CRA can audit workers up to six years after the year they received the income. If there’s a discrepancy between your declared income and what the platforms report, it could lead to audits. If it’s determined that full taxes were not paid it could mean significant consequences, such as;

  • Fines
  • Penalties
  • Liens being taken out against assets such as you’re home
  • Wage or account garnishment
  • Revocation of government-supported benefits such as tax credits

Understanding tax obligations

Gig workers are considered self-employed for tax purposes. Self-employment status makes record keeping and prompt tax payments particularly important.

Record keeping

It’s important that gig workers keep detailed records of all income and expenses, and it is recommended to keep these records for at least six years. This is essential to ensure that what the platform operator reports to the CRA matches their own records.

Tax payments

Since taxes aren’t automatically deducted from gig worker pay, they must set aside funds to cover their income taxes, either through monthly installments or annually when they file.

Tax benefits and deductions

Yes, this change means many gig workers will have to report more earnings, however, there is good news. Gig workers are entitled to a range of deductions and credits that can help reduce their tax burden and maximize their refund. These can include:

  • Auto-related expenses (mileage, maintenance, etc.)
  • Travel expenses
  • Home office expenses (portion of utilities, rent, mortgage interest, property taxes, and home insurance)
  • Mobile phone and internet bills
  • Software subscriptions
  • Advertising and marketing costs
  • Shipping costs
  • Accounting and legal costs
  • Meals and entertainment (for clients, 50% deductible)
  • Professional development activities
  • Interest on business loans

Other key tax considerations

GST/HST/QST: If gig earnings exceed $30,000 in a single year, gig workers must register for a GST/HST/QST number. Ride-sharing drivers must register before making their first dollar.

CPP/QPP: Those who make more than $3,500 are required to contribute to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP).

Employment Insurance (EI): EI is optional for self-employed workers, but gig workers can opt-in to receive benefits like maternity, parental, and sickness benefits.

Advantages to filing taxes properly: Filing taxes provides access to provincial and territorial tax credits and benefits like the GST/HST credit and the Canada Child Benefit. Also, Declaring more income creates more room to contribute to your Registered Retirement Savings Plan (RRSP).

Staying compliant

To ensure you’re compliant, it’s important to:

  • Keep meticulous records of all income and expenses.
  • Understand the new reporting requirements under Bill C-47.
  • Ensure that the information reported by platforms aligns with your own records.
  • Take advantage of all the eligible tax deductions and credits.

While all the points above are important, the number one thing all gig workers can do to stay compliant is plan. Have a plan to set aside money regularly for tax purposes. This will lessen the blow of a big payout come tax time. It will also go a long way to avoiding having to pay even more by way of penalties or fines.

How to file self-employment taxes

Reporting self-employment income is fairly straightforward. Fill out a Statement of Business or Professional Activities. It includes instructions on how to fill it out properly. The completed form is then filed along with the rest of their tax information.

Unable to make a tax payment?

Luckily, the Government of Canada offers options to help people struggling to pay their taxes. The easiest one, for example, is to schedule a series of payments online. If that option won’t work, call the CRA to go over what other options are available. The earlier someone calls to implement a solution the more options that will be available to them. Remember, even those unable to make their tax payment should still file before the deadline.

Controversy

Bill C-47 has come around at a very interesting moment in gig work culture. There’s a big debate going on in the world of gig work. Gig platforms are standing firm that those using their platforms to earn money are not employees and therefore, employment regulations and legislation do not apply to them. Gig workers, on the other hand, say they are employees and therefore deserve to be covered by the same rights and protections that any other employee has.

Arguably, albeit loosely, Bill C-47 could be seen as a win for gig workers in the debate. If they’re not employees, why do they need to report income to the CRA? All other self-employed persons report their own income.

Wrap up

In essence, these tax changes impact the gig platforms more than the gig workers. Platforms will have a big job compiling and reporting all this information to the CRA and the workers. That being said, it’s just as important for gig workers to be aware of this change so they stay in the good graces of the CRA. This is especially true for the rather large group of gig workers who said they wouldn’t necessarily report all the income they earned from their gig work. Sending up a red flag to the CRA because their information doesn’t correlate with that of the gig platforms’ could lead to hefty fines and penalties.

Already struggling with debt and now facing a hefty tax payment? We can help. Talk to one of our trained Credit Counsellors to discuss the best debt solution for your situation.

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