“Especially in the first year … make sure that if you’re not familiar with how to report self-employed income, seek assistance and get it right, rather than take the risk of getting it wrong. It’ll take a lot longer and cost a lot more to fix it,” said Bruce Goudy, director of BDO Canada’s indirect tax practice.
More and more Canadians are earning income from websites and apps, whether they’re renting out a property on Airbnb, delivering food through Uber Eats, or doing graphic design on Fiverr.
In December 2023, 927,000 people ages 15 to 69 years old said they had earned money from a digital platform in the preceding year, said Statistics Canada. This included platforms that pay workers directly and those that connect workers with clients.
If you earn money through a digital platform, you are considered self-employed, said Stefanie Ricchio, a chartered professional accountant and spokesperson for TurboTax Canada.
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How to report self-employment income
Instead of the standard T4 tax form you get from an employer, you’ll need to report your self-employment income on a T2125 form when you file your taxes.
As well as your income, you also need to report your expenses, said Ricchio. These expenses can include home office costs, car maintenance, and even the fees you pay to the digital platform—there are hundreds of deductions available, she said.
“The more eligible deductions that you apply to that income, the less that tax bill is going to be when you file.”
Because you’re generally not collecting taxes when you earn money on a digital platform, you need to be prepared to pay those taxes when you file, said Ricchio. She recommends setting aside about a quarter of your income for this purpose.
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