If you are driving for UBER, there are several Tax implications you may not be aware of. Being an UBER driver, you are regarded as an Independent Contractor, and not an employee. As an independent contractor, you are considered a self-employed individual operating your own business and must take care of your deductions and remittances, as UBER does not take care of these on behalf of its drivers. That means you will have to file form T2125 “Statement of Business or Professional Activities” with your T1 General Income and Benefit Tax return (Personal Tax return), as well as file an HST return, if required.
Money earned from UBER is considered as self-employment income and taxed as such, including referral income. Your Income after eligible deductions is used to calculate your tax payable, CPP contributions and HST payable for the year.
If you are earning more than $30,000, you also have to register for GST/HST account with CRA. When UBER makes an earnings deposit in your account, this amount includes HST collected and you are required remit this amount to CRA. This also means you are able to claim eligible ITCs (Input Tax Credit) for the purchases and expenses related to your business activities.
For Example, If your gross earnings are $40,000, its includes HST collected of $4,602 and is payable to CRA, and the remaining $35,398 is your net earnings. In most cases UBER drivers will have to file GST/HST returns on annual basis. An Uber driver who only grossed $25,000 last year would still have to register for the HST if he or she had one or more other business incomes — freelance professional? actor? — that brought in another $5,000 or more.
EXPENSES & DEDUCTIONS
As an UBER driver, you likely have a wide range of eligible business expenses. Below are the most common fees for UBER drivers which should reported on your income tax return.
- Common Vehicle expenses – Fuel, Maintenance & Repairs, Insurance, Lease payments, Safety & Emissions. This is after splitting the business and personal use of vehicle during the year.
- Service fees – The service fees paid to Uber are considered to fall into the category of Management/Administration Fees.
- Cell Phone expenses – Your cell phone is a component of your business. You may be able to claim a portion or the entire bill including the cost of the phone itself and monthly charges used for business.
- Tolls – You may incur toll charges when offering rides to passengers. You can likely enter this reimbursement as an expense.
- Supplies – Some supplies may be eligible as tax-deductible
Getting the paperwork right is one of the biggest challenges faced by Uber drivers, because they’re often new to the responsibilities of self-employment. It is very important as CRA expects every driver to keep receipts of all expenses deducted against income, and a detailed log of every ride (excluding personal use).
- UBER’s Earnings Summary
- Car’s Mileage (Odometer reading), and personal use of vehicle
- All original receipts of expenses deducted
- Destination of every ride
Since the “no cash” rule applies to money received as well as earnings placed into driver accounts, an accurate trail of information exists for Canada Revenue Agency to follow and audit. Failure to reporting correct income and deductions or not registering for HST (if required), can lead to Tax audits in future, and the tax payer may be penalized with large amounts for failure to report and remit proper amounts to the federal government.Uber drivers with unreported HST or unreported income will need to submit a voluntary disclosure (VDP) or tax amnesty application to CRA.
Contact us today and use the code “UBERD” if you are an UBER driver, and get 30% off on your Personal Tax return.