04/07/2016 10:00 EDT | Updated 04/08/2017 01:12 EDT

Earn extra income this year through Uber or Airbnb? Remember to report it

OTTAWA — People who drove for a ride-hailing service like Uber or rented out their homes through Airbnb last year earned extra income, and that needs to be reported come tax time.

"When you decide to put up the post for a room in your house or your cottage or in fact if you happen to sign up with Uber and be a driver, you've got I think an approach to earn income or money," said Paul Woolford, a tax partner at KPMG.

"As such, there's a need to report the benefits of those efforts."

But some costs that were paid to earn the extra cash can be used to offset income and reduce taxes owing.

"In a simple context, anything that you incurred to provide that income ... you can take an expense for the related cost," Woolford said.

The complication comes in the shared aspect.

"There's property taxes that apply to both personally and the room, there's heat and electricity, there's water costs, there's potentially repairs," Woolford said.

For example, people who rent out their cottage for one month of the year can take one 12th of the property taxes, insurance, and heating-cooling costs and expense those against the income they receive.

The profit is then rental income that must be reported on a tax return.

For those who worked as a driver for Uber, that means having kept logs detailing how much they used their cars for personal use and when they drove paying passengers to determine how much may be deducted.

"Record keeping becomes very important," Woolford said.

Earlier this year, Airbnb agreed to email the 11,000 people in Ontario who list their homes or other spaces for rent on its site and tell them to report the income as part of a pilot project with the province.

Dale Barrett, a tax lawyer and principal at Barrett Tax Law, said he was unaware of any instances of the Canada Revenue Agency requesting information from companies like Uber or Airbnb so far.

"However, at any given time this could happen," he said. "If these companies are American, the information could go from the American company to the IRS, from the IRS to CRA, then all of sudden they'll know who all the Canadian players are and they can go ahead and reassess."

Barrett noted that several years ago the agency launched a probe reviewing big eBay sellers and obtained information on its so-called PowerSellers.

"If you're doing business with one of these sort of new economy-type of websites and you're earning income, one way or another, the CRA will eventually find out," he said.

"And if you haven't declared it, you're going to be subject to penalties and if the amount is great enough, prosecution."

Craig Wong, The Canadian Press