Uber Drivers Often Unaware of Income Tax, GST/HST Obligations

Tax experts say some Uber drivers are operating under misconceptions, with the most common being that their earnings are tax-free, reports CBC News.

Actually, that’s not exactly the case: Uber drivers need to report their earnings and fill out Form2125 with their personal tax returns and, if they have earned more than $30,000 a year, must register with the Canada Revenue Agency (CRA) to charge GST/HST.

The “issue” here is the responsibilities of self-employment: Uber drivers essentially need education on their filing requirements and, once that’s done, are “generally on good footing.”

The catch is that every Uber driver is an independent contractor in the eyes of the taxman. Although the payment is routed through the app, they are not employed by Uber and are thus responsible for reporting their earnings.

The CRA expects drivers to log every journey, even personal, and keep receipts for any expenses, which can be deducted against income. It would be wise to set aside roughly 20% of every day’s take to cover federal and provincial income tax, the CBC article suggests.

Those earning more than $30,000 a year need to pay GST/HST, which means a further 13% from their earnings, alongside Uber’s take and the set-aside 20% for tax-paying purposes.

“There seems to be a very broad range of misconceptions,” Dale Barrett, tax lawyer says. For example, some don’t realize that the HST threshold is cumulative for multiple sources of independent income. 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 contract-based gigs — freelance designer? actor? — that brought in another $5,000 or more. The combination of self-employment can push you over the limit,” he says.

Some may try to avoid income tax and GST/HST, but Uber’s no-cash policy makes its drivers an easy target for the CRA, because there is an electronic trail from the credit card company, to Uber, and then to their accounts.