Uber drivers & cra audit
CRA has conducted a tax audit of Uber in Canada and has asked for access to Uber’s books and records. They did the same thing with Ebay a few years ago, and audited Ebay power sellers. The big danger to Uber operators may not be municipal regulation or opposition from Taxi drivers, but the tax man. CRA has the right to obtain details of Canadian Uber drivers from Uber Canada and to then do a tax audit of those drivers to ensure that they have reported all of their Uber income. Income earned from operating a vehicle as an Uber driver is fully taxable and has to be reported to CRA, although expenses related to operating that vehicle, such as car insurance, gasoline, and repairs and maintenance are fully deductible. If you are losing sleep because of unreported Uber income, your situation may not be as bad as you fear. Any Uber drivers who have unreported Uber income are subject to prosecution for tax evasion as well as civil penalties for unreported income. However CRA tries to promote voluntary compliance with Canadian income tax laws, through the voluntary disclosure program (VDP) also known as tax amnesty or tax pardon. The purpose is to encourage taxpayers, such as Canadian Uber drivers, to come forward to report any previously unreported HST or income or to file tax returns that were not previously filed. The Uber driver, through a Canadian voluntary disclosure income tax lawyer, must initiate the voluntary disclosure with Revenue Canada before it commences an income tax audit of unreported Uber income. If CRA has begun audit or enforcement action, or even asked for information, the disclosure will not be considered to be voluntary and full penalties and possible prosecution will be applicable. The voluntary disclosure application must include enough information and details to allow CRA to verify all of the facts. If the voluntary disclosure is accepted there will be no criminal prosecutions or civil penalties, including gross negligence and late filing penalties. There is a full waiver of all possible income tax penalties and sometimes an interest reduction is available as well. The taxes that would otherwise have been owed will have to be paid, along with interest. In addition, the identity of any Uber driver making a voluntary disclosure for unreported Uber income will be held in confidence. This is the opposite to CRA’s position with all other income tax prosecutions where they seek the maximum publicity possible and issue press releases. It is important to emphasize that the voluntary disclosure program applies even to someone who has committed deliberate tax evasion, including failure to declare income, such as Canadian Uber drivers who have not declared their income. Go to www.canadiantaxamnesty.ca/article/uber-drivers-and-income-tax-and-hst/ to know about some frequently asked questions.
Check out our page about how Canadian Tax Income applies to Uber Drivers
FAQ's
The type of expenses that are deductible for Uber drivers depends on the jurisdiction they are working and declaring taxes in. Drivers can use the cost of gasoline, car insurance, public liability insurance, tolls, servicing, and repairs as deductibles. It is sometimes also possible to deduct a percentage of mobile phone costs, passenger amenities, parking, and some elements of lease payments. It is wise to keep all of the receipts for these deductibles.
Uber does report to the CRA. The Canadian tax authorities have the legal right to be given the details of drivers that live or work in the country. Any income earned from working as an Uber driver is taxable. Although some expenses are deductible. Drivers who have failed to report in the past have the opportunity to set the record straight using the CRA Voluntary Disclosure Program (VDP).
Uber drivers prepare taxes the same way anyone who is self-employed or owns a small business does. They keep a record of how much they earn and their expenses, some of which are deductible. Using this information, Uber drivers fill out their tax returns and calculate how much they should be paying.
Uber drivers must keep records of the money they receive from Uber, as well as their expenses, so that they can prepare and file proper income tax returns each year. Because Uber drivers are independent contractors, they will not be issued a T4 slip. Uber drivers are required to complete a T2125 when preparing their tax returns. This form is known as a statement of business activities. It details all of the income earned as well as all of the expenses.
Yes, you can write off the costs of any tolls or parking fees you incur while working as an Uber or Lyft driver. However, it has to be for a business expense. If you drive through a toll on your own time, the cost isn't considered tax-deductible. Keep records of all the tolls you drive through and any parking receipts, and add them to your collection of business receipts.
The gross income received from Uber will be reported to the CRA and to you on form 1099. Failure to report that income will be considered income tax evasion, subject to fines and penalties.
Disclaimer:
"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
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Certified by the Law Society of Ontario as a specialist in Taxation Law