By Mitch Rice
A full-time job is meant to provide you with enough money so that you can pay your bills and live a comfortable lifestyle. Unfortunately, that isn’t the case for many. To say the past few years have been difficult is a gross understatement. Between the financial fallout of the COVID-19 pandemic, the inflation that followed (and the rise in the cost of housing and just about every other expense), it has left people looking for ways to earn some extra money on the side.
Canadians are known for being resilient in challenges, and that’s likely why so many have looked at earning additional income online. Whether they have tried selling music online, uploading content on streaming platforms like Spotify and YouTube, or even playing online casino games with the hopes of striking it big, there are many options out there.
If this sounds familiar and you’ve been earning or thinking about earning money online, there are tax implications you need to know about. We’ll go over some of the most important tax tips Canadians should know to protect their financial portfolio.
What Counts as Earning Money Online?
It’s important to define what counts as earning money online. If you’re only earning a bit of cash, it’s easy to assume it’s no big deal and you don’t have to worry about taxes. But this could be setting you up for disaster. It’s always better to err on the side of caution and look into what counts as earning money online.
Begin by reading up on the new Reporting Rules for Digital Platform Operators. This is meant for people who earn money through a digital platform. It’s all about being more open and transparent about financial earnings. If you offer any types of services or sell goods online, these rules will affect you.
What about earning money through online lottery and casino winnings? There are plenty of fast withdrawal casinos in Canada that make it very attractive to those looking to earn a little side cash. While you don’t need to report winnings of any amount, unless it is a prize tied to an achievement, you do have to report income earned on those winnings. For example, if you invested your winnings, the interest earned is taxable.
Track Your Earnings in an Organized Manner
If you need to include your online earnings in your tax filing, it’s wise to start thinking about a way to track them. Creating a spreadsheet, using a specific platform, or even using an app to track earnings can make easy work of this task. If you’re tracking earnings as they occur, it means tax season will be much smoother.
Factor in the Currency Exchange on Earnings (if Applicable)
Another tip is to make sure you’re tracking earnings in your currency. Sometimes, online work requires a currency exchange to take place. Whatever your currency amount, it is what you need to include in your tax return.
Don’t Omit Earnings Even if They Are Small
While it can be very tempting to leave earnings off your tax filing, it’s never worth the risk. Even small amounts need to be included. You don’t want to be flagged for an audit, and you certainly don’t want to look as though you’re hiding income from the CRA. Not declaring the full and accurate amount of income can result in provincial, territorial, or federal penalties if the amount is more than $500.
Include Deductions Whenever Possible
Those whose main source of income comes from online work can attest to how useful deductions can be. These are expenses that you can deduct from your earnings, which can then lower the taxes you need to pay.
Deductions can include expenses for things such as computer hardware and software, office supplies, travel, marketing or advertising, and much more. If you meet the criteria, you can even use home-office deductions like your mortgage interest, insurance, rent, utilities, and more.
When in Doubt Speak to an Accountant
If you are ever in doubt about which online earnings you need to report to the Canada Revenue Agency, how to report them, and what may or may not be taxable, it’s best to speak to a qualified accountant who can advise you properly.
There are independent tax consultants and chartered professional accountants (CPAs). A consultant can certainly help with the basics of tax filing, but they don’t have to be formally trained. A CPA, on the other hand, does require formal training, so they will have much more knowledge and insight into current tax laws that will make for accurate and efficient tax preparation.
Is Earning Money Online Worth the Hassle?
While not a tip, it’s a valid question to ask. Knowing how important it is to track your income and accurately declare all income on your tax filing, you may wonder if it’s worth the hassle. Because there is no limit to what you could earn online as a side hustle, the answer is generally yes, it is absolutely worth the hassle.
Not being able to pay your bills each month is stressful and not sustainable. That doesn’t necessarily mean you should start looking for a new and better-paying job. Earning extra income online can be a convenient solution, whether in the short or long term.
You Don’t Want to Take Risks With Your Taxes
Filing taxes can be confusing at the best of times, but once you start earning money online, there are a lot more implications and rules to be aware of. Doing your research is important, but that may not be enough. Putting your trust in a trained professional may be the smartest decision, as you don’t want to take any risks when it comes to filing your taxes.
Data and information are provided for informational purposes only, and are not intended for investment or other purposes.