Canadian Rideshare Taxes: Income Tax for Uber and Lyft Drivers

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There are many new rideshare drivers that have lots of questions about taxes. While the best advice we can give you is to talk to a professional, we answered a bunch of frequently asked questions to help you get a better understanding about how taxes work for an Uber or Lyft driver. 

This is one post of a three part FAQ series we have put together for rideshare driver taxes. If you want to learn more you can find the links to other helpful tax information at the bottom of the article under Helpful Rideshare Links.

Rideshare Tax Basics

Let’s start with some of the frequently asked questions rideshare drivers have. When you are starting out this can all seem a bit daunting, so let’s look at the basics first.

Am I an Employee or Contractor?

Congratulations, you’re a business owner! You are not an employee for Uber (and most rideshare companies) but are known as an independent contractor. 

This means you are a self-employed individual and responsible for different things than if you were just an employee for Uber.

When will I get my T4?

Never! That is because a T4 is for employees and as an Uber driver, you are an independent contractor. 

What you will get is a Tax Summary from Uber that shows your total earnings (gross fares) and the HST you have collected which you will need for your 2017 taxes. You can access the summary by logging into your account online.

If I am not submitting a T4, then what is it? What if I have another job?

You will still only be submitting one income tax return but you will be adding an extra form called a T2125 – Statement of Business Activities. Quebec residents will use Form TP-80-V. Uber will not be giving you this form, it is a tax form you file which your accountant will provide or it will be auto-completed if you are using a tax software program.

Where do I get a business number? Do I need a business number?

Yes, you will need a business number. You will also need a business number in order to get your HST number, you can register online for a business number. Once you sign up you will get your business number and a confirmation letter will be mailed to you which you should keep for your records. You can register for both your HST and business number together.

Do I need an HST number if I make under $30,000?

Yes, as of July 1, 2017 all rideshare drivers in Canada are required to get an HST number and collect it on each fare regardless of income. 

Fore more information on sales tax check out Canadian Rideshare Tax: GST, HST, QST for Uber Drivers.

Do I need to incorporate my business?

Probably not, unless you are making a TON of money or want to shield yourself from some liability. If you run another business, this may be an option suitable for you. Most part-time and even full-time rideshare drivers do not incorporate.

You should consult both an accountant AND a lawyer to understand whether incorporating your business is right for you.

How it Works

Now that you know that you are a business owner, you have some more responsibilities than if you were just an employee. This includes paying your own taxes. 

What kind of taxes do I have to pay?

When you are an employee, your employer takes off money from each pay cheque and gives it directly to the government for your taxes. As someone who is self-employed, you have the responsibility of doing this yourself, as well as paying the employer portion of things like EI if you decide to opt in. Let’s look at the most common deductions that you will need to save up for when tax time comes.

Employment Insurance (EI)

As a self-employed person you do not have to have make Employment Insurance contributions unlike if you were an employee. Bad news is you don’t get Employment Insurance benefits if you didn’t pay any contributions but since 2011 you can opt-in to pay Employment Insurance if you wish through the Canada Employment Insurance Commission by signing through you My Service Canada Account. This will give you access to “special benefits” like maternity leave, compassion benefits, etc.

You can learn more about the benefits you qualify for, eligibiity requirements, etc. by visiting the website. If you live in Quebec you already qualify for maternity, paternity parental benefits through the Quebec Parental Insurance Plan but you can opt in if you wish to get coverage for sickness, compassionate care and family caregiver benefits only.

QPIP

In Quebec you have to pay into the Quebec Parental Insurance Plan which covers you similarly like EI for things like parental leave. The amount you have to pay is based on your net income. It will become due when you file your taxes or you may have to pay instalments the following year. More information from Revenu Quebec can be found here.

Canada Pension Plan (CPP) Contributions

You will have to pay CPP contributions on your Uber income if you make over $3,500 (including other sources of income) unless you live in Quebec where you will contribute to the Quebec Pension Plan.

When you are an employee your CPP contributions are deducted from your pay and your employer also makes contributions on your behalf. When you are self-employed (as an Uber driver) you have to pay both the employee and employer contributions. The amount you have to pay is based on your income and there is a maximum limit of contributions each year.

The CPP rate has remained at 4.95% since 2003 and is still the same in 2018. Given you are self-employed you have to pay the full amount where normally it would be split between you and your employer. An up-to-date and complete table of the rates, minimum and maximum amount of contributions, etc. for each year can be found here.

If you want to “over-save” for CPP you can just put away 4.95% each pay. This is more than you need because it will be based on your net income (after all your business expenses) as well as any amounts you have contributed through other sources of income. You can learn more about CPP contributions on the CRA’s website.

If you live in Quebec, you contribute to the Quebec Pension Plan (QPP) instead. The rate is a little bit higher at 5.4%. Revenu Quebec provides up-to-date information on the rates, minimum and maximum amount of contributions, etc. which can be found here.

Income Tax

You will also have to pay federal and provincial tax, which is normally deducted off your pay when you are an employee. As an Uber driver you want to make sure you save enough throughout the year to pay this tax because it is not taken off your pay.

The amount you have to pay is based on your income in certain tax brackets. You can find out the rates for federal income tax and your province here. In Quebec you can get the rates here.

An tax professional can help you determine a good amount to put away each pay or you can try to estimate based on your last year if you are making around the same amount.

Remember, having a second job immediately complicates all of these calculations so you have to base it on ALL of your income, not just driving for Uber. You also need to take into account that some of your expenses will lower your earnings which will ultimately lead to lowering you much tax you pay,

rideshare tax uber lyft canada income

Frequently Asked Rideshare Tax Questions

Do I have to make instalment payments for my income tax?

You will be informed if you need to make income tax instalment payments after you file your taxes but generally if you end of owing over $3,000 you will need to a payment at the end of each month. If you live in Quebec, threshold is actually $1,800. There are a couple of different ways to calculate this and when the government gives you your first notice you be presented with a couple options at that time.

What if I can’t afford my instalment payments or I am late?

You will be charged interest on late installment payments. If the interest grows to over $1,000 you will be assessed a minimum $1,000 penalty!

How does tax work if I am a new Canadian?

Once you become a resident of Canada you will have to file an income tax return. Consult the CRA’s website for a guide to taxes for newcomers. Remember to get some help from a tax professional until you learn the ropes!

When do I have to pay my taxes and file my returns?

Your taxes are due April 30, 2018 but as a business person you can wait until June 15 to file. However, you will have to pay interest on any amount you end up owing from May 1 until the date you pay in full.

What happens if I don’t report my income from Uber?

If you don’t report your income, you will be be assessed a penalty if the CRA finds out. This will apply if you knowingly or under circumstances amounting to gross negligence, have made a false statement or omission on your 2017 return.

The penalty is equal to the greater of:

  • $100; and
  • 50% of the understated tax and/or the overstated credits related to the false statement or omission

Once the tax is calculated, you will also have to pay interest on it from the date it was due until you pay in full. The rates can be found here and change every 3 months. You may also get audited and even get charged criminally under certain circumstances. 

What happens if I don’t file my taxes on time?

If you actually file late then it is a charge of 5% of the amount you owe right away and then 1% every month after that.

This is the charge on the tax you owe federally and provincially unless you live in Quebec, where the provincial government is responsible for the provincial portion.

If you keep filing late the penalties are much more severe. If you don’t think you can afford to pay any outstanding taxes it is much better to file your returns anyways and make arrangements to pay because the interest and penalties are much less severe.

You can find the complete list of deadlines to file here.

Do I need an accountant? Can I do my own taxes?

You do not need an accountant to do your own taxes and you can either prepare your own manually on paper (although we don’t recommend it) or online using a tax software.

For your first year driving Uber, we would recommend consulting a tax professional to get some tips on how to keep your books in order, what are appropriate expenses to claim, how HST works and more complex things like having multiple incomes or another business. 

A tax professional can also help you understand how much to save from each pay for taxes and HST so you don’t spend it all and end up with a big bill come tax time.

How can I do my own taxes?

There are a number of online applications you can use to complete and file your own taxes. Uber drivers get discounts with Turbo Tax and H&R Block.

Turbo Tax is 20% off.

H&R Block is 15% off in-person tax filing and 20% off online.

You can also do it manually on paper but it is 2018 so why bother? Plus, it is a lot easier to make a mistake when you are manually calculating the math.

We are not professionals at this but we sure tried hard to gather the best information we could and consult with experts in the field. Nothing here should be taken as professional tax, legal or business advice. Every persons situation is unique and different. The government often changes rules and each province has their own requirements. You should consult with a tax and/or legal professional for advice and can also ask questions with your tax authority.

If you do see something that doesn’t quite seem to hit the mark or have any ideas on how to make this information even better, please contact usand if you are a driver, we will feature your referral code on our site!

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About The Author: Commercial Driver HQ

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