For Those Working In The Gig Economy, Taxes Present Problems
This article looks at some of the tax implications for those working in the gig economy.
With the internet and smartphone apps making it easier than ever for people to become their own bosses or make a little extra cash on the side, the so-called gig economy is growing at a rapid pace. Online platforms, like Uber and Airbnb, have provided many people with a source of income that is outside of the traditional economy. While the gig economy has certainly benefited many people, it has also brought with it its own unique set of challenges. For those who make money through the gig economy, tax season can be an especially challenging time, especially since many such people are unaware of what their tax obligations actually are.
Income Is Not Tax-Free
As CBC News reports, many people who get extra income through gig economy services are often under the mistaken belief that their income is tax-free. This belief, however, is entirely mistaken. The Canada Revenue Agency expects people to report all of their income, including income derived from “gigs.”
In fact, because those working in the gig economy are usually classified as self-employed or as independent contractors, they often need to learn a host of financial and tax skills that those who receive more traditional pay cheques don’t usually have to consider. Anybody who makes income through the gig economy should keep extensive records about their income, such as printing out payment confirmations and keeping a log of the services performed. Somebody renting out their apartment on Airbnb, for example, should keep a log of each time the apartment is rented out, to whom, and for how much.
Benefits And Responsibilities
Aside from keeping meticulous records, those involved in the gig economy should be aware of other obligations they may have. For example, independent contractors who earn more than $30,000 per year generally have to charge and pay GST/HST. That requirement is something that many people working in the gig economy are completely unaware of, and it poses special problems given that many gig economy platforms are based in the United States and do not take GST/HST into account. In other words, independent contractors could find themselves responsible for paying the required GST/HST out of their own pockets.
On the plus side, as the Hamilton Spectator notes, independent contractors could also get special tax deductions. Somebody who works freelance online, for example, may be able to deduct a portion of their rent if they work primarily from home. Tax deductions can get complicated, however, so it is best to talk to a tax advisor about what those possible deductions may be.
Legal Tax Advice
One of the unfortunate aspects of being self-employed is that self-employed people are generally more likely to attract the attention of a CRA auditor. For people who are independent contractors and who are having trouble with the CRA, a tax lawyer can help. An experienced lawyer can negotiate with the CRA on a client’s behalf and help that client get his or her tax affairs in order faster and easier.