The rapidly expanding gig economy in Canada provides countless opportunities to work from the comfort of your home and perform other “gig jobs.” There are an abundance of websites that support finding and posting gig jobs or projects, including but not limited to Fiverr and Upwork. Being a gig worker has a number of benefits: you can be your own boss, make your own schedule, and make a decent amount of money. However, there are quite a few things to know about the gig economy and Canadian taxes. Simply because a gig worker is not a full-time employee does not mean that they are not required to pay tax on the income they earn from gig work. Many freelancers and other self-employed people in Canada are not aware of their tax obligations, which is why there are so many misconceptions about Fiverr taxes and the requirements for managing taxes for gig work. At Jeremy Scott Law, we help handle any tax issues that employers or workers may face as a result of freelance work in Canada. My goal is to help clients relieve the burden of financial stress. Call 902-403-7201 to discuss what would be the best outcome for your specific tax situation.
What Is the Gig Economy?
The term “gig economy” refers to a free market system based on flexible, temporary, short-term, and freelance jobs. Common examples of gig jobs include driving for a rideshare company such as Uber or Lyft and freelancing on freelance platforms like Fiverr and Upwork. Gig workers are typically considered self-employed rather than employees. A 2019 study released by Statistics Canada revealed that gig workers accounted for an estimated eight percent of the Canadian workforce. However, those were the pre-pandemic numbers. The number of gig workers in Canada has most likely increased since 2019.
Do Canadian Gig Workers Have to Pay Taxes?
Many Canadians who rely on the gig economy for extra income or do gig jobs as their main source of income mistakenly believe that they do not have to pay taxes. However, a gig worker’s income is not tax-free. Regardless of the amount earned by a freelancer or another independent contractor, any income earned from gig work must be reported to the Canada Revenue Agency (CRA). According to the official website of the Government of Canada, residents of Canada must report their income from all sources on income tax returns, including any income earned from gig jobs. Failure to report income can be considered tax evasion and may result in serious penalties. In Canada, the tax-filing deadline for self-employed people is June 15. If you have any questions about the gig economy and Canadian taxes, you can direct them to a knowledgeable tax lawyer at Jeremy Scott Law.
What Are a Gig Worker’s Tax Obligations in Canada?
As mentioned earlier, all residents of Canada must report their income from all sources on income tax returns. Reportable income includes the income derived from gig jobs, freelance work, temporary or short-term contracts, and other sources. Since gig workers are typically considered self-employed individuals or independent contractors, they may not understand what their tax obligations are.
One thing to know about tax obligations for gig workers is that there are strict requirements for keeping extensive records about the services performed and the income earned. For example, a freelance graphic designer working through Fiverr must keep a log of each completed project and the amount he earns for the project. Contrary to popular belief, these gig platforms do not take out taxes for freelancers working through the actual platform. Since these gig platforms do not withhold taxes from a freelancer’s payments, it is a freelancer’s responsibility to pay taxes to the CRA.
Can Gig Workers Deduct Business Expenses?
Freelancers and independent contractors may also be eligible to deduct certain business expenses related to their income earned from gig work. However, in order to deduct expenses related to self-employment, workers in Canada must keep proper records of:
- All earnings from gig jobs and self-employment
- Details about each gig job
- Details of the expenses incurred by the taxpayer while performing the job (and any receipts or invoices to prove the expenses)
Maintaining proper and detailed records related to their gig work can help a taxpayer deduct eligible expenses. Tax deductions for gig workers can be complicated, which is why many freelancers choose to seek tax advice from an experienced lawyer. As a skilled tax lawyer at Jeremy Scott Law, I help clients understand their tax obligations and possible deductions.
GST/HST and Taxes for Gig Workers
Another thing to know about the gig economy and Canadian taxes is that gig workers may have to register for and pay to the CRA the GST/HST on taxable sales. The abbreviations refer to the goods and services tax and the harmonized sales tax, respectively. In Canada, independent contractors whose total taxable income exceeds $30,000 over four calendar quarters must charge and pay GST/HST. Many workers in the Canadian gig economy are not aware of this requirement.
What Happens if a Gig Worker Does Not Pay Taxes?
While it is not likely that the CRA will come after an individual who earns an insignificant amount of money from gig work, there is always a risk of being accused of tax evasion. That is why it is vital to understand how gig workers are taxed in Canada and what steps to take to file taxes accurately and in time.
Tax Advice for Gig Workers
As a tax lawyer at Jeremy Scott Law, I am dedicated to helping everyone understand their tax obligations regardless of their status, whether they are an employer, a freelancer/independent contractor, or employee. Taxes can be overwhelming for both employers as well as gig workers. To learn more about the gig economy and Canadian taxes, contact our office today. I respect the confidentiality and privacy of my clients and help them tackle their tax issues, including problems related to freelance and independent contractor taxes, in the most efficient manner possible. I am available for a consultation at 902-403-7201, and look forward to visiting with you.