Canadian Gig Workers Impacted by Changes to Income Tax Act - January 31 Reporting Deadline is Looming; Are You Compliant?

New rules require platforms to report Canadian gig workers' details and earnings –
H&R Block research indicates significant portion of gig workers could be exposed to risks by not declaring all income

CALGARY, AB, Dec. 18, 2024 /CNW/ - If you're a driver, blog writer, selling crafts on Etsy, renting out a room through Airbnb, or earning income through another type of online platform, it's critical to understand how to comply with new tax-related measures. In 2024, new legislation (called Bill C-47) came into effect, which requires gig platforms (websites and apps you use to earn income to do freelance or contract work) to share certain information with the Canada Revenue Agency (CRA) on your behalf. This new legislation serves to address concerns among tax authorities that tax obligations are not being accurately calculated by digital platforms and that gig workers full income isn't always visible to tax administrators. Gig platform operators are now required to file an 'information return' with the CRA, which includes sharing mandatory user identifying and income-related information for all Canadian gig workers using their platform no later than January 31, 2025.

"H&R Block research indicates that in 2024 around 9 million (28%) Canadians reported being part of the gig economy, of which 32% said they were willing to risk not declaring 'any' income and 43% are willing to risk not declaring 'all' income in an attempt to pay less in taxes," said Yannick Lemay, Tax Expert, H&R Block Canada. "Not declaring all income carries significant risks and is effectively breaking the law. The new reporting rules for gig platforms require operators to provide identifiable information on their users and their related income to the CRA. If these reported amounts are not aligned with what gig workers declare through their tax filing, it could create significant red flags with the tax authority and lead to potential financial penalties. It's imperative that Canadian gig workers understand and are compliant with the new reporting requirements through Bill C-47. With the CRA's looming deadline of January 31, 2025, now is the time to act to avoid potential financial penalties."

Key Considerations Around Bill C-47 for Canadian Gig Workers:

• Bill C-47 involves amendments to Canada's Income Tax Act around 'mandatory disclosure rules': This includes what needs to be reported to the CRA, and requires gig platform operators (such as Uber, Lyft, Airbnb, Vrbo, Etsy, eBay, Poshmark, etc.) to collect and report identifying information about Canadians who use their platforms and the income they earn.
• New gig worker information reporting requirements: Gig platforms must collect and report information for every Canadian that uses the platform and share it with the CRA, including: full name, date of birth, primary address, tax identification number or TIN (for most Canadians, their authorized tax identification number is their 9-digit social insurance number (SIN), issued by Service Canada).
• New financial disclosure requirements: Platform operators must report their own financial transactions and collect information on revenues earned by Canadians who use their platforms based in Canada.
• Platform operators are required to give their gig worker users a copy of the information they provide to the CRA: This ensures gig workers are aware of what is being sent on their behalf. It's important this information aligns with the user's own records and matches what they report at tax time.
• Mandatory electronic filing: The new bill also includes several administrative changes that require taxpayers to use the CRA's electronic services rather than sending information manually. Certain tax filings and payments must be done electronically, for example for payments over $10,000 and if you are filing five or more T4 slips.
• January 31 deadline: Platform operators must file an information return with the CRA, containing the required information relating to their users, no later than January 31 of the year following the calendar year in which any Canadian is identified as a reportable user of the platform.
• Noncompliance with Bill C-47 can result in significant financial penalties: By not reporting all their income, Canadians risk facing significant penalties and interest on top of any amount owed.

"Maintaining meticulous records is imperative for gig workers to track your income closely and ensure that what the platform operator reports to the CRA aligns with your own records, noting all related expenses," said Lemay. "The good news is there are a multitude of tax benefits and credits that gig workers are entitled to, which can help maximize their refund and lower their taxes overall. While the range of expenses you can claim depends on the type of gig work you are engaged with, they can include travel, auto-related, software subscriptions, home office expenses, mobile phone and internet bills, shipping, entertaining and interest or bank charges on business loans, to name just a few."

About the survey

These findings are from a survey conducted by H&R Block from April 22-24, 2024, among a representative sample of 1,506 Canadians. The survey was conducted in English and French. For comparison purposes only, a probability sample of this size would carry a margin of error of +/-2.53 percentage points, 19 times out of 20.

About H&R Block Canada

A trusted partner of Canadians for over 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. Learn more at www.hrblock.ca or 1-800-HRBLOCK.

SOURCE H&R Block Canada Inc.

For more information: H&R Block c/o Ketchum, Katie Duffy, [email protected], 647-772-0969