If you earn income as an independent contractor for SkipTheDishes, DoorDash, Uber Eats, or similar platforms, the Canada Revenue Agency (CRA) considers you self-employed. This means you are responsible for reporting your income, deducting expenses, and paying taxes.
Step 1: Understand Self-Employment Income
- Self-Employment Definition: You are not an employee of these platforms; you operate as a sole proprietor providing delivery services.
- T4A Slips: Some platforms, like Uber Eats, may issue a T4A slip summarizing your earnings. However, you must report all income, even if no slip is provided.
Step 2: Filing Your Taxes
- Report Your Income:
- Use Form T2125: Statement of Business or Professional Activities to report your self-employment income.
- Include all earnings from deliveries, including tips.
- Calculate Net Income:
- Deduct eligible business expenses (see below) from your gross income to determine your net income.
- File by Deadline:
- Self-employed individuals must file their tax returns by June 15, but any taxes owed are due by April 30.
Step 3: Deduct Eligible Business Expenses
As a delivery driver, you can claim various expenses related to your business. Here are common deductible expenses:
1. Vehicle Expenses
- Gas, maintenance, repairs, insurance, and licensing.
- Parking fees (not traffic fines).
- Depreciation (Capital Cost Allowance) for your vehicle.
2. Mileage
- If you use your vehicle for both personal and business purposes, you must track the kilometers driven for deliveries versus personal use.
- Keep a mileage logbook or use an app to calculate the business-use portion of your vehicle expenses.
3. Communication Costs
- A portion of your cellphone bill if used for work-related activities like navigation or communication with customers.
4. Food and Drink
- Meals and beverages during work hours are not usually deductible unless you meet specific CRA requirements (e.g., travel away from your primary work location).
5. Other Expenses
- Hot bags, phone holders, or other delivery-related tools.
- Fees charged by the platform (e.g., Uber service fees).
Step 4: Keep Accurate Records
The CRA requires you to keep detailed records of your income and expenses. Ensure you:
- Track Income:
- Record all payments received from platforms and tips.
- Save Receipts:
- Maintain receipts for gas, repairs, insurance, and other expenses.
- Use Apps:
- Consider apps like MileIQ or QuickBooks Self-Employed to track mileage and expenses.
Step 5: Pay Taxes and CPP Contributions
As a self-employed individual, you are responsible for paying:
- Income Tax:
- Based on your taxable income.
- Canada Pension Plan (CPP) Contributions:
- Self-employed individuals must pay both the employer and employee portions of CPP (approximately 11.9% of net income over the basic exemption).
GST/HST Registration
You must register for a GST/HST account if your annual self-employment income exceeds $30,000. Once registered, you:
- Collect GST/HST on delivery fees.
- File GST/HST returns, typically quarterly or annually.
Frequently Asked Questions
Q: Do I need to pay quarterly tax installments?
A: If you owe more than $3,000 in taxes from self-employment income in the prior year, the CRA may require you to pay quarterly tax installments.
Q: Can I deduct my entire vehicle expense?
A: No, you can only deduct the business-use portion. You must calculate the percentage of vehicle use for work.
Q: What if I don’t earn $30,000 in a year?
A: You don’t need to register for GST/HST if your self-employment income is below $30,000 annually. However, you must still report all income on your tax return.
Tips for Delivery Drivers
- Save for Taxes: Set aside a portion of your income (e.g., 25%-30%) to cover taxes and CPP contributions.
- Track Mileage: Use an app to maintain a detailed log of your business kilometers.
- Consult a Tax Professional: If you’re unsure about deductions or GST/HST registration, seek advice from an accountant.
