If you live in the city or any suburban area, then you have heard of Uber. Uber is a company that essentially works as a taxi service but just a little bit cheaper than your regular cabs. The way Uber works is by downloading the app off your phone’s app store, then after downloading, you can add a debit card or credit card to the account to use. After everything is set up a customer can order an Uber which is anyone who is of legal age and has a four-door vehicle. It is basically a taxi service without the conventional use of taxi services.
For Uber to stop being a side job for some extra cash the Canada Revenue Agency has to see that you are putting in as much work as a normal business that you are a sole proprietor of. This way you are also taxed as a sole proprietor. If you are making more than $30,000 from Uber, then you must register for an HST number so that you can collect the HST amounts you charge and then pay your taxes. Also, since an Uber driver is considered an independent contractor, they will have to fill out a T2125 form when they are doing their tax returns. The T2125 form is for independent contractors or sole proprietors who are running their own business. This must be filled out.
You can claim expenses to help lower your income, but you must have valid proof. This means that you should have a log with your mileage, these should include destinations and the distance along with the reason, distance used for work and distance used for personal resources. This should all be recorded so that it is easier for you when it is time for taxes.
It is always best to record these things because being an Uber driver basically means you are self-employed. You are an individual contractor so you will be taxed as such. The CRA will look at your net income and you should be able to distinguish what is your business expenses and personal expense so that you can be taxed accordingly. If you were to get audited by the CRA you will need to prove that the expenses you are claiming for your self-employed business are indeed valid expenses. If you were to lie or are unable to prove these claims, then you will face a fine and interest charges.
It is always best to stay ahead of any wrong incase of an audit, so always declare the smallest amount of income or the CRA will find it and fine you for hiding it.
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Muhammad Nasrullah and Muhammad Nasrullah CPA Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.
Muhammad Nasrullah,CPA, CGA, LPA
Chartered Professional Accountant
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