What You Need to Know About Taxes
Freelancers and independent contractors, like Ride-share drivers are free to work when they want, how much they want, including the days of the week, and the time of day. That flexibility comes with being self-employed – your own boss.
Being self-employed is very different than being an employee. Ride-share drivers are required to file their income taxes as self-employed individuals, which means that in addition to completing the usual income tax forms, the T2125 form must also be included which reports self-employed income and sets out the self-employed tax deductions being claimed.
Which Tax Forms?
The main tax forms used to complete your personal income tax return are the T1 General and the Schedule 1. As an independent contractor, you will also need to enter your Ride-share Partner information on the Form T2125, Statement of Business or Professional Activities.
TurboTax Self-Employed helps you file your personal and business taxes together, while providing extra guidance through self-employment income and deductions.
Let’s take a look at what you should gather before starting your return in TurboTax.
To complete your income tax return, you’ll need to gather information about your income, expenses, and mileage as a Ride-Share driver.
Ride-Share Partner Income
The total income you have made as a Ride-Share Partner can be found on your Annual Tax Summary. Along with your income, your Annual Tax Summary also contains some of your deductible expenses including fees and mileage.
Your annual tax summary can be found in your Partner profile.
Tax Deductible Expenses
Next, you’ll want to gather all of your receipts, bills and statements that you will be entering which may be eligible as deductible expenses.
Common tax deductible expenses for Ride-Share Drivers include:
- Gas, oil, windshield washer fluid, brake fluid, antifreeze and other maintenance expenses
- Repairs and routine oil changes
- Tires (including the cost of balancing/installation)
- Lease payments
- Car washes/detailing
- Supplies such as pens/paper and water/snacks provided to your passengers
- A portion of cell phone expenses
Deductible expenses can help lower your tax owing, so be sure to claim all of your eligible costs. you can refer to the Canadian Revenue Agency website, for a more comprehensive overview of deductible expenses for independent contractors, or make sure to take advantage of TurboTax, which contains all of the deductions and expenses available and guide you through the process to ensure that you claim all that apply.
Lastly, you’ll need to know a couple of mileage numbers from this tax year.
- Total kilometers you drove as a Ride Share Driver – A summary of the distance you drove with passengers can be found on your Annual Tax Summary.
- Total kilometers you drove overall – Keeping track of the odometer reading from the beginning of the calendar year, and then taken again at the end of the calendar year would provide you with a total of all kilometers driven over the entire year. You will need this number when filing your taxes using TurboTax, to calculate the amount of deductible kilometers.
Other Basic Tax Information
In addition to your ride-sharing related information, you will also need to have other basic tax information on hand to get your return started with TurboTax, including, but not limited to;
- Your Social Insurance Number
- Your date of birth (your spouse or common-law partners SIN and date of birth, if applicable)
- Gather up your slips, T-slips, receipts, and any other tax documents pertaining to your taxes and keep them handy
Preparing your Income Tax Return
Using TurboTax Self-Employed will take the guesswork out of your taxes. TurboTax translates taxes into simple questions about your life, so you do not need tax knowledge – or an appointment – to get your taxes done. TurboTax guides through your return step-by-step and with the Business Expert Interview, entering your self-employment information is a breeze.
Filing your Tax Return
Once you’ve entered all of your information into TurboTax Self-Employed, you’ll know if you have tax owing or are entitled to a refund. The ticker in the top left corner of the product increases when you add your income, and reduces when you add your expenses. When you are done, TurboTax provides you with a complete tax summary outlining your taxes owing, or your refund, and for ride-share drivers, you can see how your business income was earned.
Your income tax return for 2018 has to be filed on or before April 30, 2019, but because you earned self-employment income, your tax return is due by June 17th, 2019, and if you owe the CRA money, that has to be paid in full to the CRA by April 30th.
If you’re new to Canada or it’s your first time filing an income tax return, you have to send your return by mail. TurboTax has you covered. Simply print out your return, sign it, date it and remit the signed return to the Canada Revenue Agency address listed on your tax documents.
Where to get TurboTax Support
We’re here to help you – get answers to your questions through AnswerXchange. We’ve got answers from TurboTax experts and customers like you to help you get your taxes done right.
Frequently Asked Questions
Q: Will I have to pay tax?
A: Everyone’s tax situation is unique and there are many factors that determine whether or not you’ll receive a refund or have a balance owing to the CRA. TurboTax can help guide you step by step through your taxes and help you find every tax deduction you deserve. As you enter deductions into TurboTax, you’ll instantly see their impact on your refund or tax owed. No surprises, no waiting until you’re done. It’s real-time information on the status of your refund.
Q: Do I need a T4?
A: As an independent contractor, Form T2125 is used to report your self-employed income and expenses. If you received other employment income, you may receive a T4 from those employers.
Q: Do I have to register for a GST/HST account?
A: Yes. Ride-share Drivers are required to register for a GST/HST account
Q: How do I register for a GST/HST Account?
A: We wrote this great article regarding the GST/HST. We recommend you use that for all your answers to GST/HST questions.