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The Black Hole

2012 taxes for postdocs: Dredging up the past

BY DAVID KENT | FEB 21 2012

A landmark decision was made late last month by the Ontario Labour Relations Board regarding the status of postdoctoral fellows.  Jesse Greener, President of the University of Toronto’s Postdoc Association has recently, and nicely, summarised the impacts of this ruling on the Canadian Association of Postdoctoral Scholars discussion board.

I am writing this because I want to make sure that all the facts are out there, as best as I can represent them. As you probably already know, the Ontario Labour Relations Board issued a decision on January 20 that states Postdoctoral Fellows are employees of the universities where they work…this decision is binding on all Ontario universities, not just U of T…

Jesse goes on to discuss the implications of the ruling, with a particular focus on what this means for postdoctoral fellows and their employment rights.  The reason that I’ve chosen to have this story lead this year’s blog entry on taxes is because it is the result of the frustration felt by postdoctoral fellows over the clarification of the scholarship exemption and whether or not postdocs are trainees or employees. Status across the country is highly variable and is one of the main issues that CAPS faces in higher level discussions with universities, the government, and funding agencies.

If you are interested in our previous discussions on these matters, please do visit the following entries which include the pros and cons of employment status and how you can deal with your tax as a postdoc in Canada:

  • 2011 Taxes for Post Docs: At least we know the rules this year
  • The CRA response to CAPS (guest blogger Carl Wonders)
  • Let the Discussions Begin (guest blogger Marianne Stanford)
  • 2010 Canadian Taxes: Did you get your T2202 and T4a?
  • Budget 2010: Post Docs, be careful what you wish for…

The practical information has not changed much for this year’s filing and is summed up in 2011 Taxes for Post Docs: At least we know the rules this year.  Basically, postdoctoral income by grant, scholarship, fellowship, or any other means is taxable in Canada.  If you are paid off a research grant, there may be some remit for claiming research related expenses, but you definitely do not qualify for the scholarship exemption.

Of additional interest is this morning’s “Daybreak Montreal” episode on CBC radio which featured an interview with a Montreal postdoc who, as was the case for many postdocs in Quebec, was hired with the understanding that their postdoctoral stipend would be tax exempt.

Basically, the CRA maintains that either the university or the individual misinterpreted the federal tax policy and they have simply corrected the issue.  The Quebec government still bins postdoctoral fellows as research trainees that have student status which is reflected in its tax policy, and places postdocs in an even more confusing situation.  This is especially problematic for international postdocs who have not grown up with the Canadian tax system and are trying to make decisions about whether or not to contribute to the Canadian research enterprise.  This final point is further underscored by the McGill Dean of Graduate and Postdoctoral Studies Martin Kreiswirth who notes that this CRA decision negatively impacts a university’s ability to recruit and retain postdocs, 62% of whom are international at McGill.  This will be a tough battle for postdocs who find themselves in this situation.

Overall, I feel that the key points remain the same:

  1. Whether through tax incentives or not, Canada needs to find a way to increase the take-home pay of the average Canadian postdoctoral fellow if it wishes to remain a competitive option for international postdocs.  Numerous other countries (e.g.: Australia, Switzerland, United Kingdom) have substantially higher remuneration packages.
  2. Postdocs need to have a defined status – trainee or employee.  It doesn’t have to be the same for all postdocs, but it needs to be clearly spelled out before any position is accepted.  At least then, people will know where they stand and what they are signing up for.

In the meantime, I would encourage people to follow the CAPS website and be in touch with your local Postdoc association.

 2011 Taxes for Post Docs: At least we know the rules this year

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. Lance Robinson / March 7, 2012 at 05:09

    In 2011 I received $38,000 from a SSHRC post-doctoral fellowship and $5,000 for research expenses. The latter amount must be accounted for to SSHRC. I recently received my T4A for my SSHRC and was surprised to see that the entire $43,000 was enterred in box 105 (scholarship, fellowship, bursary, etc.). I would have thought the $5,000 would have been separated and entered in box 104 (research grant), so that I could deduct expenses. How have other people handled this? No way I want to add $5,000 to income for tax purposes!

    • Dave / March 9, 2012 at 14:54

      Hi Lance,
      For CIHR, I am fairly certain that they do not do this. The T4a includes your salary stipend only and does not include the research budget. One question that comes to mind is whether or not your T4a is being issued by SSHRC or by your university – I would imagine that SSHRC would issue the same as CIHR, but universities will sometimes handle money and taxes differently.
      If it is from SSHRC directly, I would simply write them and request a new T4a that doesn’t include the 5,000 and if they refuse, ask them why their policy is different from CIHR. If it’s your university, then go and speak with your HR person to see if they can get it re-issued.
      Another possible option (though I don’t know how well it would work) is to file with 38K as your income and when they re-assess (if they do), send back a letter explaining why you did it this way and provide evidence of what you spent the monies on (travel, conferences, other research expenses)
      Hope that helps!
      dave

  2. Lance Robinson / March 12, 2012 at 01:39

    It was from SSHRC. I’m waiting for a reply from them.
    And, by the way, thanks Dave for the great work you’re doing here. Keep posting!

  3. Lance Robinson / March 14, 2012 at 21:14

    Here’s an update on what SSHRC told me and what I found in one CRA interpretation bulletin. SSHRC explained that, “After reviewing the T4A process and the CRA definitions, SSHRC Management agreed that all funds disbursed under a scholarship or fellowship program fall within the primary purpose of ‘to further education and training of the recipient’ and is to be included as income.” This, they clarified, applies to both stipend and research allowance. They referred me to CRA Bulletin IT 75-R4, which does seem to support their inclusion of the total amount in Box 105 of the T4A (see especially IT 75 R-4 section 11). The same bulletin explains that the funding agency must determine whether the primary purpose of the fellowship is to “further the education and training of the recipient in his or her individual capacity”, or to “carry out research for its own sake”. If the fellowship is for both of those purposes “the recipient may not include part of the” award as fellowship income and part as research grant. This seems to mean that SSHRC is actually not allowed to separate out the $5,000 research allowance from the stipend as I was expecting them to have done.
    This strikes me as insane. SSHRC expects me to spend this $5,000 for field research, attending conferences and similar expenses, and to account for it. I am not permitted to spend it on personal expenses such as rent and food. Yet, it seems that I still need to treat it as income.
    Another uncertainty relates to the fact that the $5,000 is for expenses over two years of the fellowship: if it turns out that CRA is in fact more humane and logical than what I assume is the case, will they let me carry forward part of the $5,000 to my 2012 taxes and to therefore deduct the expenses over two years?
    Dave, I’m sure some of your readers must have faced such questions in years past. If any of you have experience with how to handle this $5,000 research allowance in a SSHRC post-doctoral fellowship, I’d love to hear about it.

    • Dave / March 15, 2012 at 10:56

      Hi Lance,
      It does seem troubling indeed and something that I’ll table at the next CAPS executive meeting for input and a strategy going forward. I think the vast majority of our readers are in the sciences, and (though I stand to be corrected on this) I believe that CIHR separates the $5000 from income and it is not taxed. I am just in the process of digging up my old T4a forms to confirm/deny this.
      What I do know from some of my friends who have SSHRC is that their policy is consistent – others are also taxed on their $5000. I think that CAPS is the group that can get the most voices together on this – I’ll be sure to update you.
      In the interim, if others have any information to share, please do so!

  4. DT / March 22, 2012 at 16:19

    Since it’s on the topic of postdoctoral taxes, does this change anything?
    http://www.canlii.org/en/ca/tcc/doc/2012/2012tcc81/2012tcc81.html
    Document Excerpt:
    Huang v. The Queen. Tax Court of Canada, March 12, 2012. Neutral
    citation: 2012 TCC 81. Court File Nos. 2011-2650(IT)I and
    2011-2660(IT)I. Woods J. Federal Income Tax – Inclusions in income –
    Postdoctoral research funding – Whether a fellowship or a research
    grant – Whether taxpayers were students – The taxpayers were
    postdoctoral research fellows who received funding from the Parkinson
    Society Canada to conduct research under the supervision of a
    university professor. The research was conducted at the university. The
    Minister including the funding in the taxpayers’ incomes and the
    taxpayers appealed to the Tax Court of Canada. The Court found that the
    funding was on account of a fellowship rather than a research grant.
    Furthermore, the taxpayers were enrolled in a program at a university
    that required them to do full-time research for the purposes of
    advancing their education, the funding was received in connection with
    enrolment at a university, and they were “students”. Accordingly, the
    amounts were exempt. Taxpayers’ appeals allowed. – I.T.A., s. 56(1)(n),
    (o), 56(3), 118.6(1), (2).

    • Dave / March 23, 2012 at 14:08

      Hi DT – great find and thanks for sharing this. It certainly sets a precedent for PDFs who were part of OHRI / UOttawa during the 2006-2009 period as their program was defined and they were issued the T4a tax form. However, it is certainly still a tricky area as the Chabaud ruling is in the opposite direction.
      I think individuals will need to figure out where they sit themselves for that tricky period, but going forward it is very clear that fellowships are taxable.
      Thanks for your comment!
      Dave

  5. Kelly M. / March 26, 2012 at 18:36

    Do you know whether post-docs are eligible to opt into the EI program? I’d like to have another baby at some point, and parental benefits are needed!

    • Dave / March 27, 2012 at 10:17

      Kelly,
      Every province and university has their own take on whether or not postdocs are employed or self-employed and it’s a pretty big mess right now – CAPS is definitely trying to get a handle on this. For now, check out the CRA site http://www.cra-arc.gc.ca/tx/hm/xplnd/menu-eng.html to determine your EI eligibility. It should be possible to either apply through your university/research institute or to apply as a self-employed person. Whether or not postdocs are employees or self-employed is a really confusing one and handled very differently, but the ruling in Ontario suggests that PDFs there are leaning toward the employee definition. Stay tuned for such info.