Based on new research, those with a side hustle are willing to break the law
Most Canadians pay their taxes, and most would say that they declare the income they make from their main job or full-time business to the tax authorities.
But it seems the growing number of people who derive some or all of their income from the ‘gig’ economy are less committed to following tax laws, according to a new survey commissioned by H&R Block Canada.
It found that 28% said they are part of the gig economy, equating to nine million across Canada, with 58% having started work such as dog walking, home repairs, or selling products online, to help meet the rising cost of living.
More than seven in ten respondents said their additional work is a side hustle alongside their main job while 28% said it is their main income.
However, with tax season underway, the cost of living is perhaps also contributing to a sharp rise in the percentage of poll participants who are willing to take the risk of not being transparent with the Canada Revenue Agency or Revenu Québec about what they earn from their gig.
While less than three in ten admitted they did not include all of their gig income in their 2023 tax return (for 2022 income), this surges to three quarters in 2024 with 43% saying they are willing to withhold some of last year’s gig income and 32% saying they won’t reveal any of it.
However, this is not necessarily about honesty with 25% of respondents saying they are not clear on the tax implications of gig income. For example, requirements to keep accurate records, obtain a GST/ HST/ QST number if earnings exceed $30,000, and to make CPP/QPP contributions if earnings are above $3,500. In Quebec, there is also a requirement to pay EI premiums.
Don’t get caught out
"While Canadians' appear tempted to not declare all or any gig-related income, this carries major risks. Ultimately, it's breaking the law," said Yannick Lemay, Tax Expert, H&R Block Canada. "The CRA and Revenu Québec can audit workers up to six years after the year they receive the income. We're also seeing some shifts in how gig-related platforms are being required to report income, which create increased transparency into gig workers' income.”
These changes refer to legislation requiring digital platform operators to report income incurred within the year by individual participants. While these rules won’t be implemented until the 2025 tax season, some platforms might already be reporting to the CRA in some fashion.
On the plus side, there are certain benefits that come from tax filings and a higher declared income can create more room to contribute to an RRSP.
“By not reporting all their income, Canadians risk facing significant penalties and interest on top of any amount owed. The good news is there are a multitude of tax benefits and credits gig workers are entitled to, which can help maximize their refund and lower their taxes overall," added Lemay.
