I get it, times are tough and we are are feeling the pinch. But with C-47 now in effect, there are some material changes for Canadian who have a side hustle.
According to a recent H&R Block survey, approximately 9 million people or 28% of the population indicate that they participate in the Gig economy. So what is the "Gig economy"?
Well according to CRA, the gig economy generally refers to services provided through short-term contracts, freelance work, or other temporary work that is arranged through an online platform or mobile application.
In the gig economy, gig workers operate as independent contractors and freelancers. Common platforms used in the gig economy may include, but are not limited to:
Contracted services can range from a micro-task (a small task set up through the Internet) to specialized services. Contracted services can include tasks such as:
Depending on the gig, workers may do the work from remote locations. Online platforms and mobile applications can connect consumers and businesses with gig workers from all over the world.
C-47 now now requires the facilitators of those services to report to the CRA who received monies by issuing a T slip for 2024. So, what does that mean?
For many Canadian residents who already participate in the Gig economy, nothing really has changed, because you already report your worldwide income. However, for those who don't, there are significant impacts. Failure to report income is a very serious offense, punishable with a combination of monetary penalties and or jail time. The penalties are substantial when it is negligent - like 100% of the non reported income. The reassessment's don't just stop at the Income Tax Act. Social benefits such as Child Tax Benefits, GST/HST credits, Provincial tax credits, Old Age Supplement are all income driven, and will be subject to recapture. If one has exceeded the $30,000 threshold, there exists GHT/HST registration issues.
Depending on the type of income, it will either be reported on the T776 - Statement of Rental Activities or T2125- Statement of Business Activities. Both have characteristics unique to each form. Rental income does not attract Canada Pension Plan contributions, but net income from Business Activities does attract C.P.P..
Like any other Canadian business, one is able to deduct reasonable expenses incurred to earn that income. Depending on the size of the enterprise, cloud accounting platforms like Xero or Intuit' Quickbooks Online (QBO) or Expensify can help track and categorize your expenses.
While there are tax programs on the market for the do it yourselfer, it is highly recommended that one seek out professional tax advice for T1 tax preparation. With offices in Calgary, Winnipeg, Guelph, London and the GTA, Cote and Associates is able to prepare tax returns quickly and at a reasonable price. Give us a call today.