This year, the Canadian government is implementing significant changes to income tax reporting for gig workers, under Bill C-47. The new changes take effect in 2025. These changes aim to improve transparency and ensure that income earned through such digital platforms is accurately reported to the Canada Revenue Agency (CRA).
Key changes
Platforms must report: Digital platforms like Uber, Lyft, Etsy, and Airbnb are now required to report gig workers’ income directly to the CRA. This means the onus is now on the digital platforms to provide accurate information on each gig worker’s earnings. The deadline for digital platforms to report these figures was January 31, 2025.
Reporting threshold: Gig work platforms have to report income for all workers who have done 30 or more activities on the platform, and have earned more than $2,800 in a year.
Information disclosure: Platforms must provide the workers’ personal information to the CRA. This includes details like name, date of birth, address, and SIN. They also need to share the total income earned by each gig worker.
Reason for these changes
- The government is emphasizing higher transparency. The CRA will have a clear picture of what gig workers earn, preventing underreporting, whether unintentional or not.
- It will lead to better tax compliance. As the CRA will now have direct access to earned income amounts, gig workers will find it harder to hide their income.
- The goal is also to reach global regulatory standards. With the new rules in place, Canada will be aligned with international efforts and regulations around the gig economy, which ensures fair taxation.
- An important factor is the ability to address tax evasion. The new legislation aims to address these concerns, by ensuring all gig income is visible and available to authorities. Gig workers will no longer be able to underreport their earnings.
Broader context
Critics say this regulation targets low-income gig workers and may make things harder for them. The current status quo is that platforms don’t provide sick days, PTO, or other employment benefits and protections to gig workers. There is already a conversation around this, with gig workers feeling like they got the short end of the stick in this deal. Gig workers feel platforms should provide these employment benefits, especially for the many people who do gig work full-time, and consequently devote full-time hours to these platforms.
With the new government regulations, platforms are now intermediaries for income reporting. However, they are still not obligated to offer employment benefits. This adds friction to the ongoing discussion, as the platforms are now taking over income reporting duties like an employer, but not adhering to labour laws that are in place to protect employees.
How do they currently report?
Gig workers are considered self-employed, so they must report their income on their personal tax returns. They would be using Form T2125 (Statement of Business or Professional Activities) to declare their annual income to the CRA, to be taxed accordingly.
Being self-employed, they can deduct eligible business expenses, like travel costs, home office, etc. This can further reduce taxable income. If your gross revenue before deductions exceeds $30,000 consecutively in four quarters, self-employed workers must register for GST/HST. Your gross revenue includes the total value of goods you sell or services you provide, which are subject to GST. Even if you haven’t collected it from your clients, you are still liable to pay. If you think your revenue will be more than $30,000 in a year, registering for GST/HST can also reduce your overall taxable income by increasing what you can claim on your tax forms.
What are the consequences if you don’t comply?
Penalties and audits: Noncompliance with the new regulations carries heavy penalties. Any failure to report income results in financial penalties. You may also have to pay interest charges. The CRA can potentially audit you at any time, for up to six years after you earn unreported income.
Legal risks: Not declaring your income is against the law, and is considered to be breaking the law. With the new rules in place, any discrepancy in figures between what the worker declares and what the platform reports can trigger red flags in the CRA, which may in turn trigger an investigation.
Voluntary disclosure: Workers who have previously not reported their income accurately can do so via CRA’s Voluntary Disclosures Program. They can take this opportunity to correct their tax reporting, which may help reduce penalties.
Tips for gig workers
- The most important part here is to keep accurate records and details. Document income and expense information, so you can check if your records align with what the platform will report. Another benefit of this is if there is a discrepancy between records or the platform makes a mistake in calculating or reporting. In this situation, having accurate records as proof of activity and income would be very helpful. You’ll also know how much money you’ll need to set aside for taxes, so there are no unpleasant surprises during tax season.
- Read up on and understand self-employment tax requirements and tax obligations. If your earnings cross $30,000, you will need to sign up for GST/HST registration. Keeping accurate records throughout the year will make sure you’re not making any inadvertent errors.
- If you don’t already track, and suspect your income may be higher than $30,000 through the year, start tracking immediately. Try and do this quarterly, so you can decide whether you need to set up a GST/HST registration or not. Once you have some records, you can also make projections for future expected earnings for the year, and then calculate what your income tax is likely to be.
- Use tax benefits. There are many deductions and credits you can make use of, like home office expenses, the cost of a vehicle, software subscriptions needed for work, work equipment, and more. To take advantage of this, you must keep detailed and accurate records. It will help greatly come tax time.
- Consult a tax professional for relevant and clear information. If you’re not sure about the tax implications this new rule may play out for you, consult a tax professional. They can help you ensure compliance with the law and help you see how you can maximize your benefits.
- Stay updated with tax laws and reporting requirements to avoid getting caught on the wrong foot. Make a good-faith effort to be clear and honest in your reporting.
Key Takeaways
The Canadian government has set new legislation for income tax reporting for gig workers. Under Bill C-47, an amendment to the Income Tax Act, platforms that employ gig workers must share their income information with the CRA. The main goal is to enhance tax compliance and accurate income reporting.
As a result, the ongoing debate about worker protections, employment benefits, fair working conditions and status has intensified. With the new rules in place, gig workers now have to keep accurate and detailed income records, to avoid financial and legal repercussions. Set aside money accordingly, so you have enough come tax time. If you’re currently dealing with debt, you can contact one of our trained credit counsellors for advice – they can help you figure out which debt solution could be the right fit for your financial situation.
