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The Black Hole

2011 taxes for postdocs: At least we know the rules this year

BY DAVID KENT | FEB 21 2011

Last year, one of the hottest topics on the site was Budget 2010 and the new rules regarding postdoctoral fellowships. Those entries are still among the most popular:

  • (latest post) 2012 Taxes for Postdocs: Dredging up the Past
  • 2010 Canadian Taxes: Did you get your T2202 and T4a?
  • Budget 2010: Post Docs, be careful what you wish for…
  • The CRA response to CAPS (guest blogger Carl Wonders)
  • Let the Discussions Begin (guest blogger Marianne Stanford)

The short and sweet version is that all postdoctoral fellowships are taxable income in Canada and will not fall under the scholarship exemption.

In all of the brouhaha of last budget season, many of you know that I was involved in writing a few letters to MPs concerning their House of Commons remarks with respect to postdoctoral fellows and the taxation of their fellowships.  In some cases, I think there was a genuine lack of understanding of what a postdoctoral fellow does/is and how many there are performing research in Canada.  Most interesting, however, was a response received from Jim Flaherty regarding postdoctoral fellowships which stated:

Unlike post-secondary students enrolled in courses and pursuing a degree or diploma, post-doctoral fellows can be compared to a number of other professionals such as lawyers, medical residents, and accountants, where there is a period of paid training at the beginning of their careers.  Similar to these other professionals, the compensation received by post-doctoral fellows is taxable

I give full credit to Minister of Finance for a clear position on an issue in Government, it is good to know where we stand.  After some online sleuthing, I came up with some information on medical residents, accountants and lawyers that made me feel like this was a slightly unfair comparison:

First of all, postdoctoral fellows are training for unknown occupations.  Postdoctoral fellows become tenure track professors less than 35% of the time while for PhD holders in general this falls below 20% whereas medical residents, training lawyers and accountants have a certain sense of career progression and stability in that they will most often become medical doctors, lawyers or accountants.

Second, there is an enormous compensation discrepancy (The numbers referenced above are pulled from the following sources for medical residents and accountants in the Government’s training program)

  1. By the fourth year of training, medical residents in Canada make between $54,685 and $68,298 depending on province of employment, have at least 4 weeks of paid vacation, extended health and dental benefits, and in general are treated like full fledged employees.
  2. The national mid range salary for articling students, according to a June 2004 Canadian Lawyer article, is between $57,110 and $64,970.
  3. By the fourth year, training accountants in the Government’s own Financial Management Group program are earning between $72,404 and $93,339
  4. By contrast, the median salary of a post-doctoral fellow is approximately $40,000 and variable access to benefits, with just 5% earning the minimum wage of any of these professions that they are being compared with.  This is compounded by the average length of a post-doctoral term being approximately 4-6 years in length and the uncertain career prospects of the first point.

So where does this leave us and what is being done?
The federal government has been pretty clear about its intentions going forward, but this leaves the typical Canadian postdoctoral salary (definitively taxable from 2010 onwards) well behind those of other countries.  Furthermore, at least some postdocs have had their 2006-09 tax returns re-assessed (even some who were issued all of the correct forms) which comes at a considerable unexpected cost.

The Canadian Association of Post-doctoral Scholars group has been a major player in this debate thanks to some very dedicated efforts by members from UofT’s postdoc association.  They have had consistent communication with MPs on this issue (leading to these interactions in the House of Commons), have filed a formal petition with the Government which garnered the following response, and are in discussions with universities, funding bodies, CAGS, CAUBO, and the AUCC.  If you feel that you can contribute to these discussions or would like to volunteer time/energy, the CAPS group would certainly be keen to hear from you.

As always, we’ll do our best to keep our readers posted on this issue.  Fingers crossed for a uniform and fair solution for all postdocs in Canada.

ABOUT DAVID KENT
David Kent
Dr. David Kent is a principal investigator at the York Biomedical Research Institute at the University of York, York, UK. He trained at Western University and the University of British Columbia before spending 10 years at the University of Cambridge, UK where he ran his research group until 2019. His laboratory's research focuses on the fundamental biology of blood stem cells and how changes in their regulation lead to cancers. David has a long history of public engagement and outreach including the creation of The Black Hole in 2009.
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  1. Carl Wonders / February 22, 2011 at 20:05

    Great summary and update, Dave. Though, I do have one thing to add that I stumbled upon. H&R Block issues tax update guides each year to everyone who is considering working for them in a seasonal capacity (long story). This year there was a specific blurb about postdocs and how their income was fully taxable (no surprise there). However, there was this interesting bit at the end (paraphrasing as I don’t have the words in front of me at the moment):
    “The CRA has consistently viewed postdoctoral income as either employment income or research grants.”
    So basically, this means that NO ONE should be receiving a T4A from their university saying they were payed by a scholarship/fellowship (in previous years it was a Code 05, but they’ve completely re-done the T4A slips this year. I believe it’s now Box 105). Fortunately, it’s always been possible to call scholarship income a research grant for tax purposes if it’s received “solely for conducting research.” This means you lose the $500 exemption, but you get the Employment Amount (ends up being almost a wash tax-wise), and your income counts towards building RRSP room for next year.
    However, I think the fact that the CRA also thinks we should be receiving pay as an employee is a more interesting one, and something that merits future discussion and potentially action.

  2. SubC / February 23, 2011 at 18:42

    Great job as usual, Dave !
    My personal take on this:
    1. I am glad that we have uniform rules across Canada and all postdocs are treated the same irrespective of province and institution. This, by itself, is a big move forward.
    2. Nobody is going to taek us seriously if we still play the ‘trainee’ card. It is far better to condsider ourselves at par with RAs and technicians and try to become “employees” instead.
    3. As employees, our biggest benefit (Tax wise) would be the ability to contribute towards RRSPs. Deferring tax payments will put a lot more disposable income in our pockets just when we need it (many of us have mortgages and families).
    By the way, do you know where the 35% rate for postdocs securing academic jobs comes from? Is it from Canada? Is it for biomedical sciences only? I’m in thebiomedical field, but the few engineering/comp sci postdocs seem to have far better success in getting faculty positions (otherwise they will move to industry instead).
    Keep up the good work !

  3. Qianguo Lin / May 1, 2011 at 19:24

    The goverment need to be changed. They should hear our voice.

  4. delstrons / August 11, 2011 at 17:34

    So I just got an offer from UofT and I will still be considered a trainee. So I guess we are getting screwed from all sides. I have a question. How much tax do we owe to both the province and the federal government. I am in Ontario and my salary is in the mid thirties. It is a pain in the ass to have to manage this ourselves don’t you think?
    Thanks for all your explanations and good work. I am also unceratain about the 35% figure. I thought it was more around 5%.

  5. Dave / August 11, 2011 at 18:13

    Hi Delstrons (presuming you’re starting a postdoc),
    Definitely get in touch with the UofT postdoc association for the most up to date Toronto specific information, but you are definitely right that the worst place to be is considered a trainee with no benefits of being one and no employee benefits. I guess the only thing you can be happy for is not paying into EI/CPP, etc – but that could be bad as well depending on your life situation.
    As far as taxes go, I think it’s pretty fair to ask all people who are working (you are now working as a scientist) to pay taxes. The bigger issue is that the salaries that young scientists are being asked to work for pale in comparison to other professions that require similar (or even substantially less) training. Your provincial and federal rates are the standard ones for all Canadians – but you might qualify for certain exemptions (if you have a T4A Code 04 for example, you my be able to claim a few thousand in related research expenses like journal subscriptions, conference travel, etc providing that you had to spend your own money on them).
    Finally – the reason I put the 35% number in here is because there is no firm statistic that I know of in Canada and some numbers quoted for particular fields are much lower, while others (as SubC alluded to with engineering) are potentially higher – the main point in this article was to give a number that I was confident was higher than the actual number to illustrate the difference between us and trainees. The US numbers are actually kept track of much better.
    This is something I hope that the CAPS group can pull together in the future – we’ll see how this progresses.
    Thanks for your comment