“Especially in the first year…make sure that if you don’t know how to report self-employment income, you seek help and do it right rather than risk doing it wrong.” It will take lots longer and “It will cost a lot more to fix the problem,” said Bruce Goudy, head of indirect taxes for BDO Canada.
More and more Canadians are getting cash from web sites and apps, whether or not they’re renting out a property on Airbnb, delivering food through Uber Eats or doing graphic design on Fiverr.
According to Statistics Canada, as of December 2023, 927,000 people aged 15 to 69 reported getting cash from a digital platform prior to now yr. These included platforms that pay staff directly and platforms that connect staff with customers.
If you become profitable through a digital platform, you are considered self-employed, said Stefanie Ricchio, an accountant and spokeswoman for TurboTax Canada.
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How to report self-employment income
Instead of the usual T4 tax form you receive from an employer, it’s essential to report your self-employment income on a T2125 form when filing your taxes.
In addition to your income, you furthermore mght must report your expenses, Ricchio said. These expenses can include home office costs, automotive maintenance and even the fees you pay to the digital platform — there are lots of of deductions available, she said.
“The more eligible deductions you apply to that income, the lower the tax bill will be when you file.”
Since you generally don’t collect taxes if you become profitable on a digital platform, you will have to be prepared to pay those taxes if you file, Ricchio said. She recommends setting aside a few quarter of your income for this purpose.
