Driving with Uber is a great way to make some additional income. For some drivers, it has become their primary source of income, but for a many, it is secondary income that may not seem significant when viewed on an individual basis. Regardless of whether the income seems significant or not, there comes with it some responsibilities that you should be aware of. It is important that Uber drivers in Canada understand what their responsibilities are with regards to GST/HST and to income taxes reporting.
Uber considers its driving partners as Independent Contractors. What this means is that Uber does not withhold any taxes and therefore Uber drivers are entirely responsible for their own tax obligations. As an independent contractor, you are considered to be self-employed and are responsible for self-reporting the income you earn in this capacity.
Uber fares are required to include HST or GST (depending on the province). This means that as an Uber driver, you are collecting the GST/HST on fares, and as such are required to remit it to the CRA. According to the Canada Revenue Agency (CRA), “A driver who supplies taxable commercial ride-sharing services on or after July 1, 2017, is deemed to be a taxi business for GST/HST purposes and must register for the GST/HST and charge GST/HST on their fares in the same manner as taxi operators
This responsibility should be taken very seriously. Failing to file and remit the GST/HST can result in severe financial consequences. As an Uber driver in Canada, you need to register for a GST/HST number, file GST/HST returns and remit the amounts to the CRA. There are filing and payment deadlines that you should pay attention to. When you register for a GST/HST number, the CRA will let you know what your filing requirements are. Failing to file or remit on time will result in penalties and interest. For GST/HST reporting and filing deadlines, refer to GST/HST important dates
If you are unsure about the GST/HST process, you should contact your accountant or tax advisor for guidance. You can also contact us and one of our tax experts can help you with your tax reporting requirements.
As previously mentioned, Uber drivers are considered self-employed individuals. This is another way of saying as an Uber driver, you are operating a small business of your own – providing a ridesharing service for a fee. Most Uber drivers operate as sole proprietors. This is the simplest form of a business structure. A sole proprietor is an unincorporated business that is owned by one person.
As a self-employed individual or sole proprietor, you have to report the income you earn from your business on your personal T1 income tax and benefit return each year. The personal T1 income tax and benefit return includes form T2125 – Statement of Business or Professional Activities where you report all income earned by the business and are able to deduct expenses you incurred to generate this income.
Here are just a few expenses that you may be able to deduct if incurred to earn income from driving for Uber:
- Vehicle Registration costs
- Vehicle repairs and maintenance
- Car cleaning costs
- Parking costs
- Fuel expenses
- Cell phone data costs
The net income or loss (income less deductible expenses) calculated on the Form T2125 is added to your other sources of income to calculate your overall income taxes on the T1 personal tax return.
Bookkeeping for Uber Drivers
It is important to keep good records of all income and expenses. As discussed above, there are tax obligations that Uber drivers in Canada should comply with. Keeping good records will make it easier for you to manage at tax time. In order to deduct the expenses when you file your taxes, you need to keep adequate records.
Important records to keep include:
- Vehicle mileage logbook
- Receipts and invoices for expenses incurred for your vehicle
- GST/HST collections