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

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.