Considering driving for Uber or Lyft? Six Things You Should Know.
Have you ever considered driving for a rideshare company like Uber or Lyft? It seems like a flexible way to meet people and make some money on a schedule you set. But before you start, make sure you are aware of your business and tax responsibilities:
1. Drivers are considered independent contractors.
You won’t need to register a business but may be able to write off some business related expenses such gas, vehicle repairs, car washes, maintenance costs like oil changes or fluids, business cell phone and plan, dash cams, your vehicle licensing and registration fees, insurance, leasing expenses, some car loan interest, safety standards certificate, relevant parking fees, transponder cost and accountant and bookkeeping fees – so be sure to keep your receipts!
2. You will become a HST collection agent for the company.
In June of 2017, a new law was passed in Ontario that people who drive for Uber or Lyft must register for an HST number regardless of whether they will make over $30,000 in a year. This is because drivers are assumed to collect HST with every transaction.
3. You need to file your HST.
If you collect HST, you will also have to pay it to the government. HST can be filed monthly, quarterly or annually. Filing can be done online with the CRA, you can call it in to the CRA or have an accountant file it for you.
4. Drivers pay out fees for each call.
Drivers pay both booking fees and a commission to their rideshare employer. A booking fee may be a few dollars and the commission is between 20-25% of each fare. Fortunately, the booking fees and commission are considered an expense and can be claimed on your taxes.
5. Make sure you claim your tips.
Tips collected electronically by the rideshare companies are tracked automatically for you but cash tips are not. And a tax auditor won’t believe you never received a single cash tip so make sure you track and claim them also.
6. Reporting is provided by the rideshare company.
One thing the rideshare companies provide to their drivers is regular reporting that summarizes the amount in fares the driver has made, HST collected, commissions and tips. This is very useful when calculating your HST and income taxes.
If you have any questions about being a driver for Uber or Lyft, contact the perspective companies or consult your accountant. Safe driving!