The 'Gig' And Platform Economies, Explained
Sometimes the terms Platform, Gig, and Underground Economies are used interchangeably. But what exactly do they mean? In simple terms…
Platform = Technology-based (think web and mobile apps, and eCommerce platforms)
‘Gig’ = Short-term, or contractual work (think side-hustles and freelance work)
Underground = Under-the-table (illegal activity like tax evasion)
The Gig Economy describes economic or business activity that surrounds “gigs” for freelance, short-term, or contract-based work. Gig-platform economy jobs are gigs like: Uber drivers, AirBnb, Crafters & Makers who sell products online, Instagram shop, Etsy sellers, Social Media Influencers, and even OnlyFans creators.
Interesting fact: a 2022 study by H&R Block revealed that 13% of working Canadians comprised the Gig Economy in 2021 - but only 5% of them express confidence in how to file their taxes! If this is you… keep reading! We’re going to look at how to approach this quickly growing business model with regards to reporting your income, and things you can claim as expenses on your income taxes.
Being a worker in the Gig Economy can mean many different things to different people. For some it could be a means to make ends meet, while others could be making their entire living working in the gig economy. Feeling the pinch of inflation in 2022, it is anticipated that more and more people will turn to the gig economy in Canada in order to maintain a certain lifestyle, or simply to afford gas and keep food on the table.
The main rule of thumb when it comes to reporting your income to the CRA, is that all income, no matter the situation, must be declared. This includes cash payments and tips. In saying this, it’s very important to keep track of all payments coming in, and keep all expense receipts and invoices (enter Hubdoc and Xero to keep your payments and receipts organized).
The good thing about recording all of your income accurately (aside from not being investigated or charged with tax evasion) is that you get to claim expenses that are directly related to your “gig.” Typically, when you’re self-employed or are a contractor - you won’t receive a T4 slip from your employer. You’ll be treated as having your own business for tax purposes, and as such you must follow all of the CRA tax rules surrounding collecting tax, reporting all income, and claiming expenses.
Let’s look at a ‘Gig’ with OnlyFans…
Let’s say you’re lucky enough to earn an income for being the sexy devil that you are, and you have 20k people subscribing to your OnlyFans channel for a monthly rate of $4.99 + tax. You’ll record this annual income as $99,800 (and record the tax you collect separately).
The CRA defines eligible expenses as follows: “To be deductible, business expenses must generally be incurred for the purpose of earning income from your platform activities, must not be on account of capital, must not be personal expenses, and must be reasonable in the circumstances. To determine your expenses, you need to keep records of:
all your earnings, details about when, how, and where you earned your income
details of the business expenses you incurred in earning your income, supported by invoices, receipts and vouchers. For example, you may be able to claim a percentage of your gas expenses if you used your personal car to earn money by providing ridesharing services.”
Here are some examples of expenses you can claim if they relate directly to your business activity…
Whatever Gig you’re in, it's important to get your books set up right, and to treat it like a business! Reach out now for a free, 30-minute consultation!