The number of gig workers is growing in Canada – but many aren’t filing taxes

Around nine million Canadians say they are part of the gig economy, equivalent to 28% of the country’s population, according to a recent report from tax preparation company H&R Block Canada.

That number is up from 22% who made the same claim back in 2022, according to the report, and 12% more Canadians are currently considering the option.

The number of gig workers has been rising over the past two decades.

Employment and Social Development Canada previously noted that the share of gig workers among all Canadians workers jumped to 10.0% in 2020 from just 5.5% in 2005.

In the fourth quarter of 2022, 2.4 million Canadians had done a form of gig work in the previous 12 months, according to a recent Statistics Canada (StatCan) report.

Tax laws and gig work

With such big numbers, however, many may be breaking tax laws, according to H&R Block Canada’s report, based on a survey of 1,505 Canadians in February.

Now that the 2024 tax filing season is in full swing for income earned in 2023, almost half of those gig workers (43%) saÿ they're willing to take the risk of not declaring “all” gig work-related income. A further 32% are willing to take the risk of not declaring “any” gig-related income.

In 2023, more than one in four (27%) gig workers didn't declare all of their gig income when they filed their taxes for the 2022 tax year.

"While Canadians' appear tempted to not declare all or any gig-related income, this carries major risks. Ultimately, it's breaking the law," says Yannick Lemay, tax expert, H&R Block Canada.

"The Canada Revenue Agency (CRA) and Revenu Québec can audit workers up to six years after the year they receive the income. We're also seeing some shifts in how gig-related platforms are being required to report income, which create increased transparency into gig workers' income. By not reporting all their income, Canadians risk facing significant penalties and interest on top of any amount owed.”

Lack of understanding about taxes and gig work

One reason for not filing taxes is the lack of understanding around gig job tax implications, according to H&R Block Canada’s report.

One in four gig workers (25%) indicate they don't have a clear understanding of the tax implications of a gig income.

“This might include knowing how to navigate having more than one income, and the differing tax requirements and considerations as a self-employed gig worker versus as an employee,” says H&R Block Canada. “For many gig workers, it can be challenging navigating the hundreds of tax credits and benefits to maximize their tax refund.”

By not filing gig work taxes, workers in the gig economy do not get access to credits and benefits, according to the tax preparation company.

“Canadians can only access certain provincial and territorial tax credits and benefits by filing their taxes,” such as Goods and Services Tax (GST), Harmonized Sales Tax (HST) and Quebec Sales Tax (QST) benefits and the Canada Child Benefit, it says. 

In November 2023, British Columbia proposed employment standards for gig workers in the province. Early in 2023, Northwest Territories also sought public feedback on its Employment Standards Act, including issues around protections for gig workers.

Gig workers earning more than $30,000 must file GST/HST/QST taxes, while those earning more than $3,500 from gig work need to contribute to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), says the tax preparation company 

And even if gig workers’ income is below the “basic personal amount” and they won't owe federal taxes on their gig work income, they still need to report their earned income “to qualify for a number of benefits year-round”, says H&R Block Canada.

Canadians doing gig work to meet rising costs

A reduction in their gig work earnings may be another reason why these workers choose not to pay taxes.

Overall, 58% of gig workers say they started working in the gig economy to generate extra income due to the financial pressures of increased costs of living, H&R Block Canada reports. Overall, 72% of gig workers indicate it's a second income to their primary employment compared with 28% who report that it serves as their sole income.

Nearly three-quarters (73%) of Canadians say the rising cost-of-living makes it hard to afford everyday expenses, and 24% are struggling to pay their bills.

“By not reporting all their income, Canadians risk facing significant penalties and interest on top of any amount owed,” says Lemay.

“The good news is there are a multitude of tax benefits and credits gig workers are entitled to, which can help maximize their refund and lower their taxes overall."

According to H&R Block Canada, there are numerous expenses, credits and deductions that gig workers can claim including: 

• Auto-related expenses (kilometres related to the gig work, car maintenance in relation to work, etc.)
• Travel expenses
• Software subscriptions
• Home office expenses (such as portion of utilities, home repairs, cleaning costs, rent, mortgage interest, property taxes, and home insurance in relation to the size of the home office)
• Mobile phone and internet bills
• Advertising and marketing costs (such as website, social media)
• Shipping costs 
• Accounting and legal costs
• Meals and entertainment for clients (at 50% deductible)
• Professional development activities, such as seminars or courses 
• Interest or bank charges on money borrowed for business