Do you work in the gig economy? Here’s what you need to know
CRA SOURCE ARTICLE
What is the gig economy?
The gig economy is based on temporary and freelance work, or short-term contracts. As a gig worker, your contract services may range from a small task to a highly specialized service. If you are connecting with clients through online platforms or applications (apps) such as Clickworker, Crowdsource, Fiverr, Uber Eats or Skip the Dishes to provide them with your services, you are typically considered to be self-employed instead of an employee for tax purposes. Your work may be carried out anywhere, as online platforms can connect businesses and independent contractors from all over the world.
Income tax obligations
As a resident of Canada, you must report your income from all sources on your income tax return. This includes any income you earn inside and outside of Canada, whether it is income from temporary, freelance work, short-term contracts or from other revenue sources.
If you paid foreign income tax, you could be eligible for a tax credit.
Gig workers who are not resident in Canada are subject to Canadian income tax on most Canadian-sourced income paid or credited to them during the year unless all or part of that income is exempt under a tax treaty. More information on non-residents is available at Non-Residents and Income Tax.
You can also claim eligible business expenses relating to income you earned through the gig economy. To claim expenses, you must maintain proper books and records, including:
a list of all earnings from gig work
details about when, how and where you did this work
details of the business expenses you incurred to do this work, supported by invoices, receipts, or vouchers
Keeping records of all your purchases will ensure you can support the expenses you claim on your tax return. To learn what qualifies as an eligible business expense, go to business expenses.
GST/HST implications
If your online activities are not a personal endeavour, and your total taxable supplies are more than $30,000 over four calendar quarters, you have to register for, collect and pay to the Canada Revenue Agency the goods and services tax / harmonized sales tax (GST/HST) on all taxable sales. You can get more details on GST/HST registration requirements at find out if you must register for a GST/HST account.
How to correct your tax affairs
If you did not report your income from the gig economy, you may have to pay penalties and interest in addition to the tax on the unreported income. By correcting your tax affairs voluntarily, you may avoid or reduce penalties and interest.
To correct your tax affairs (including corrections to GST/HST returns) and report income that you did not report in previous years, you may:
Submit an application through the Voluntary Disclosures Program. If accepted, you will receive prosecution relief, and in some cases penalty relief and partial interest relief that you would have otherwise needed to pay.
More information
You can find more information on this topic at taxes and the platform economy.
New rules regarding e-commerce services provided by non-residents in Canada came into effect on July 1, 2021. More information is available at GST/HST for digital economy businesses.
You can learn more about tax filing and your tax obligations by visiting the links above or by scheduling a free consultation with us.