The short answer is almost all of it.
A few forms of income that don’t have to be claimed are:
1. Most gifts and inheritances
2. Lottery winnings,
3. Life insurance proceeds,
4. Income exempt under section 87 of the Indian Act (this is a reference to the actual act however generally we would now refer to it under indigenous exemptions.)
The list of income that does need to be claimed is much longer and includes the following:
1. Employment Income
2. Self-employment Income
3. Pension Income
4. Investment Income
In this blog, I will touch on certain types of income that fall into grey areas and you should ultimately consult a qualified tax expert to clarify.
1. Do I need to claim the income when I sell on a peer-to-peer exchange such as Kijiji or Facebook Marketplace? In most cases, if you are selling personal effects such as clothing or household items that you are no longer using you do not have to claim these items as income as they’re generally being sold for less than you bought them for. If however, you are selling these items at a profit or buying items elsewhere (such as a garage sale) to sell at a profit then yes you are essentially operating a business and this income would be taxable as self-employed income.
2. If I shovel my neighbour’s driveway or cut their lawn and they pay me to do it, am I required to claim it? Yes, this would be considered employment or self-employment income and by law it is taxable. Many people won’t claim “odd job” income such as this but legally it is required and failure to claim it could attract serious fines and penalties under the income tax act.
3. I am a server at a restaurant am I required to claim my tips? Yes, 100% of your tips are taxable. Many servers will only claim a fraction of their tips however you are legally required to claim 100% of your tips. There are many benefits to claiming these tips as income as well that most servers don’t think about when completing their taxes. Some of these benefits include:
a. The ability to elect to pay CPP on which will cause you to be paid a higher retirement pension when you do retire.
b. The ability to use these tips as income when applying for loans or mortgages as they are declared on your tax return.
Consequently, the fines and penalties can be steep for not claiming these tips. See this article from the CBC that shows how a CRA audit over 10 years ago resulted in over $1.7 million in undeclared tips.
4. I drive and/or deliver for Uber, Lyft, Uber Eats, or Skip the dishes am I required to claim this income? Yes, in most cases this will be taxed as self-employment income, however, there have been some recent class-action lawsuits lately to have some of these “contractors” deemed employees under specific legislation and if that happens then a T4 or T4A would need to be issued by these companies. The good thing though is all of these companies provide comprehensive statements that your tax expert can use to claim this income appropriately.
5. I rent my home/cottage out on Airbnb, is this income? Yes, this will be classed as income but the type of income would depend on how it is being rented and could be considered either self-employment income or rental income.
6. I do odd jobs through Fiverr and Etsy do I have to claim this? Yes, this would generally be considered self-employed income and if the income is significant enough you would need to register for and charge GST/HST to clients based on their location as well.
7. I am a social media influencer earning money from a YouTube channel with many followers do I have to claim this on my tax return? Yes, this is income and must be declared on your return. How it is declared can be subject to different rules depending on how it’s earned and how much is earned.
Many people will think they don’t need to claim these types of income and in some cases, they may “get away with it” but the CRA has really started to crack down on the underground economy and they have many robust systems in place to track these people down who are not paying their fair share of taxes.
If you have not been claiming income that you feel you should be please read my next blog on the voluntary disclosure program and how it works.
With 20 years and counting of industry experience working in the field of accounting and taxation, Shawn P. Stemmler brings a depth of knowledge in government legislation including the Income Tax Act, Excise Tax Act, Employment Standards Act, and more to the table when serving our clients.
Shawn’s addition to the Premier Professional Accountants team in 2021 has been a welcomed addition for our clients. He’s quickly put his tax compliance knowledge to great use in helping clients navigate relationships with his existing client base and the clients of Premier Professional Accountants Inc.