The gig economy has been good to many hardworking Canadians looking to supplement their income. It’s also great for those looking to work with flexible hours that fit around school, hobby and household tasks. Remember, however, that income is income in the eyes of Revenu Québec. If your gig is driving for extra income, here is what you need to know.
Different Driving Services have Different Tax Obligations
There are many ways to drive for income, or to save money. Each has a different tax structure. The broad categories are taxi and limo service, shared car service like Uber and Lyft, and carpooling.
Driving a taxi or limo for income
You cannot drive a taxi or limo in Quebec without first being registered for GST and QST, even if you only drive occasionally. This goes for both taxi and limo owners, and those that lease the taxi or limo.
Taxi and limo drivers must report all their business income using the accrual accounting method. That means you must report your income at certain times whether or not you were paid during that time. You must also report your deductions, whether or not you paid them during that time. There are further rules for self-employed and professional drivers, and drivers in a company partnership. Drivers do have applicable credits, so be sure to account for those too.
Revenu Québec has an agreement with Uber Canada Inc. and Rasier Operations B.V. (Uber). Under the agreement, Uber collects GST and QST and submits it on your behalf. You still have obligations to Revenu Quebec and CRA, however. For one, you must be registered for the GST and QST.
Uber drivers are considered as self-employed and must report business using the accrual method. There are also different rules for Uber drivers that operate solely for Uber, and those that drive for income using Uber along with other commercial companies. Learn more about your tax obligations when driving for income with Uber by clicking this link.
Not all ride sharing companies have agreements with Revenue Québec. Be sure to check if your company has an agreement to collect and remit GST and QST on your behalf.
Carpooling isn’t a way to drive for income, but it’s a great way to save on transportation costs. It’s also very good for the environment and good for your health.
Since carpooling is not driving for income, you do not have report on money you received to cover your transportation costs. For example, if your riders give you money to cover gas, that’s fine. However, if you are charging your riders to carpool with you, that is driving for income, and the profits must be reported.
Get accounting help when driving for income
AF Accounting is here to help small businesses with their tax preparation, bookkeeping and accounting needs. Our services are tailored to meet the needs of businesses of any size. When you are driving for income, there is a lot to learn about the tax system. We can help you avoid penalties and fees. Contact us today if you are driving for income, or need accounting help with a small business or gig.