Gig workers willing to risk not declaring their income, despite evolving tax reporting requirements for digital labour platforms: H&R Block survey

32% of Canadian Gig Workers Willing to Risk Not Declaring ‘Any’ Income; 43% Willing to Risk Not Declaring ‘All’ Income, Despite Evolving Tax Reporting Requirements for Digital Labour Platforms, Reveals New H&R Block Survey

Around 9 million (28% of Canadians) report being part of the gig economy – H&R Block highlights tax considerations and benefits for gig workers

• 73% of Canadians say increased living costs make it hard to afford everyday expenses
• 24% struggle to make ends meet
• 58% of gig workers took on gig work due to increased cost-of-living
• 74% of gig workers say it’s a side hustle in addition to their primary employment
• 25% don’t have a clear understanding of the tax implications of gig work

Calgary, AB (Mar. 20, 2024) – Whether it’s freelance or contract work, delivery or transportation services, homestay rentals, dog walking, home repair services, or selling products on marketplace platforms, a huge contingent of Canadians report taking on gig work to boost their income. In a recent survey, 28% or nearly 9 million Canadians said they’ve taken on a side hustle, up from just 13% reported in 2022, and a further 12% are currently considering it, to help make ends meet in these tough economic times.

According to the survey commissioned by H&R Block Canada, almost three in four Canadians (73%) say rising living costs make it hard to afford everyday expenses, and 24% are struggling to pay their bills. These financial pressures contributed to many Canadians seeking gig employment, with more than half (58%) of gig workers reporting they started working in the gig economy to generate extra income due to the financial pressures of increased costs of living. Overall, 72% of gig workers indicate it’s a second income to their primary employment versus 28% who report that it serves as their sole income.

When it comes to declaring gig-related income, the research reveals that a significant portion of gig workers are willing to take risks when filing their taxes. More than one in four (27%) gig workers said they didn’t declare all of their gig income when they filed their taxes in 2023 (for 2022 tax year). Now that 2024 tax filing season is in full swing (for income earned in 2023), almost half of those surveyed (43%) said they’re willing to take the risk of not declaring ‘all’ gig work related income, with a further 32% willing to take the risk of not declaring ‘any’ gig-related income.

“While Canadians’ appear tempted to not declare all or any gig-related income, this carries major risks. Ultimately, it’s breaking the law,” said Yannick Lemay, Tax Expert, H&R Block Canada. “The Canada Revenue Agency (CRA) and Revenu Québec can audit workers up to six years after the year they receive the income. We’re also seeing some shifts in how gig-related platforms are being required to report income, which create increased transparency into gig workers’ income. By not reporting all their income, Canadians risk facing significant penalties and interest on top of any amount owed. The good news is there are a multitude of tax benefits and credits gig workers are entitled to, which can help maximize their refund and lower there taxes overall.”

Recent changes in how gig platforms report income: More recently, there have been shifts in how some digital labour platforms are required to report income, in light of Bill C-47. This legislation serves to implement new reporting obligations for certain digital platform operators, which could include Uber, Instacart, Airbnb, Etsy and more, intended to help ensure users are compliant with their tax obligations and create more income tax-related transparency within the gig economy. Digital platform operators will have to report income incurred within the year by individual participants. These rules came into effect on January 1, 2024, and will be implemented during the 2025 tax season, however, some digital labour platforms might already be reporting to the CRA in some fashion.

Gig workers are more open about their side hustle with employers: The research reveals there’s been a significant shift in Canadians’ level of transparency in having a ‘second job’ or ‘work on the side.’ Almost half (49%) of gig workers say their primary employer is aware of their side hustle versus 31% who said their primary employer isn’t aware.

Lack of understanding around gig job tax implications: One in four gig workers (25%) indicate they don’t have a clear understanding of the tax implications of a gig income. This might include knowing how to navigate having more than one income, and the differing tax requirements and considerations as a self-employed gig worker versus as an employee. For many gig workers, it can be challenging navigating the hundreds of tax credits and benefits to maximize their tax refund.

As we approach the peak of tax filing season, H&R Block points to key tax considerations for Canadians gig workers and those with more than one income source.

Gig workers are entitled to a vast array of deductions and credits: The good news is there are numerous expenses, credits and deductions that gig workers can claim. While the range of expenses you can claim depends on the type of gig work you are engaged with, they can include:

• Auto-related expenses (kilometres related to the gig work, car maintenance in relation to work, etc.)
• Travel expenses
• Software subscriptions
• Home office expenses (such as portion of utilities, home repairs, cleaning costs, rent, mortgage interest, property taxes, and home insurance in relation to the size of the home office)
• Mobile phone and internet bills
• Advertising and marketing costs (such as website, social media)
• Shipping costs
• Accounting and legal costs
• Meals and entertainment for clients (at 50% deductible)
• Professional development activities, such as seminars or courses
• Interest or bank charges on money borrowed for business

No T4 – you’re on your own for taxes owed: Being a gig worker is like being self-employed from a tax perspective. You don’t get T4s, which means it’s even more important to keep detailed records of income and expenses annually, and keep them for at least six years, as the CRA and Revenu Quebec can request a review anytime during that period. Your taxes aren’t automatically deducted from your paycheque, which means you must set aside funds to pay your income taxes either in monthly installments or annually when you file your taxes.

GST/ HST/ QST considerations: If your gig earnings exceed $30,000, you’ll need to register for a GST/ HST/ QST number. If you’re a ridesharing driver, you’ll need to register before you make your first dollar. It’s mandatory for ride-sharing drivers (including Uber, Lyft, and Eva) in every province to register for a GST/ HST/ QST number right away. This doesn’t apply to drivers who only do deliveries (for example, if you have an Uber Eats gig, but never drive passengers).

Gig and self-employed workers must contribute to CPP or QPP: If your income is more than $3,500, you need to contribute to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP). Contributions are calculated based on income level. The CRA calculates your contribution on your tax return, so saving funds to cover your contribution amount will help come tax time.

Employment Insurance (EI) is optional: EI contribution is optional for self-employed workers in all provinces and territories except Québec. By default, you don’t have to pay EI premiums on your self-employment income (except in Québec). As a gig worker, you can opt into the EI program by registering with the Canada Employment Insurance Commission to register for benefits such as maternity and parental benefits, sickness benefits, family caregiver benefits (for children and adults), and compassionate care benefits.

Filing gig income unlocks access to credits and benefits: Canadians can only access certain provincial and territorial tax credits and benefits by filing their taxes, such as GST/ HST/ QST and the Canada Child Benefit. Even if income is below the ‘basic personal amount’ (meaning you won’t owe federal taxes on it), you need to report your earned income to qualify for a number of benefits year-round.

Potential RRSP advantages: Having more declared income can enable you to gain tax advantages by creating more room to contribute to your Registered Retirement Savings Plan (RRSP).

About the Survey

The online survey was commissioned by H&R Block and conducted by Angus Reid Forum from February 23-27, 2024, among a nationally representative sample of 1,505 Canadians. For comparison purposes only, samples of this size would each yield a margin of error of +/- 2.5 percentage points at a 95% confidence level. Note that certain data points are referenced with a sample base of 100 or below. The survey was offered in English and French.

About H&R Block

A trusted partner of Canadians for 60 years, H&R Block Canada is Canada’s tax leader. Serving almost 1,000 locations across Canada, H&R Block’s team of Tax Experts use the latest in technological advances combined with real-world expertise to help people file taxes in office, through drop off service, upload their documents remotely, or use do-it-yourself Tax Software. H&R Block Canada can support in the preparation of personal, small business, corporate, U.S., rental, and estate taxes. H&R Block’s comprehensive education program, Tax Academy, trains new experts and ensures our Tax Experts continually update their skills. For more information, visit www.hrblock.ca.

Source: H&R Block Canada Inc.

Tags: gig economy, on-demand economy, survey