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The Black Hole

Money, Money, Money…

Scholarships, Fellowships and Taxes - what are the rules?

BY DAVID KENT | OCT 28 2009

IMPORTANT – As of March 4 and the 2010 budget, the Government of Canada has made the statement that post doctoral fellowships ARE taxable as they do not lead to a degree.

The first issue, and certainly not the last time it will be raised…

In July 2006, the federal government made a landmark tax decision. This ruling gave all Scholarships and Fellowships tax free status… or did it? It seems the jury is still out on whether or not this applies to everyone and the blurring of terminology and mountain of administrative tasks quickly took hold.

The most straightforward way to attain this tax-free status for your salary/stipend is to submit the following two forms:

  • T4A (Code 05, Scholarships and Bursaries)
  • T2202A (Tuition, Education and Textbook Amounts Certificate)

Thus far, I have not heard of anybody that has not gotten their status on this income if they have these forms. The problem comes when you don’t have these forms and there are a huge number of reasons for this ranging from perceived or legitimate ineligibility to uncooperative or under-informed human resource/finance people at your particular institute. I have tried to list some possible courses of action below, but an additional (and excellent) read on this can be found on the University of Toronto Postdoctoral Association website, as they have certainly lead this charge and have provided an excellent set of resources: http://torontopostdoc.googlepages.com/taxes . If you’re a PDF, join or form a group at your institute and ensure that they are in touch with the Canadian Association of Post Doctoral Scholars  who, coincidentally have just completed a survey of over 1000 PDFs in Canada to assess the status of Canadian PDFs.

(please note that this advice should not be taken as legal advice and comes at a time where the tax status of PDFs is still unclear, the CRA has the legal right to re-assess you for 5 years prior and charge you interest on any monies that they deem you to owe them, so this could be a VERY risky venture if a final ruling was issued and PDFs were determined to not have tax free status on fellowship monies)

T2202A

  1. If you’re a full time grad student – contact your registrar’s office, you should have this form and they should provide it.
  2. If you’re a PDF, you have two options:

a. Try and get a T2202A from your university (some PDFs have had this issued and have been charged a nominal tuition fee for status at the university as trainees) – not all universities will agree to this. If you know the status of your university, department or institute, post a comment and let people know!

b. Use the UofT petition in lieu of a T2202A (amended for your own situation in whatever province you choose) and submit it along with a letter from your department head that confirms your trainee status (feel free to contact me for a template of these if you cannot find something suitable, especially if you want a set that has worked already in BC).

T4A Code 05
If you do not have one, there are two other forms you may have:

a. T4 (the standard issue for employers to give to employees)

b. T4A Code 04 (Fellowships and Bursaries, which if you get stuck with, has its own benefits and claims which are found in the Research Grants section of the following CRA document

Trying to get one:

a. Grad Students:
If you’re on an externally awarded competitive scholarship (NSERC/SSHRC/CIHR/MSFHR, etc), your place of work (or the funding agency itself) should issue this (universities or research institutes)

If you’re paid off your supervisor’s grant, talk to your HR/finance person about why you’re getting a T4a code 04, they might be able to help depending on exactly which pot your money comes from

If you’re paid as a TA or RA, you are likely out of luck as this is considered employment proper and there is probably no way of negotiating this.

b. PDFs:

If you’re on an externally awarded competitive scholarship (NSERC/SSHRC/CIHR/MSFHR, etc), your letter of offer and subsequent financial documents probably mention something about a T4 vs. a T4A, check here first. Technically, you are on a merit-based scholarship, so you have a good argument for getting a T4a code 05. The tricky part is whether or not you want one… you may currently be treated as an employee (i.e.: getting a T4) and getting benefits, CPP, EI, etc. Winning a scholarship has been shown to strip PDFs of their benefits (crazy I know), so be careful when deciding what battle you want to fight.

***Bizarre situation to be careful of…Supervisors have been known to pay PDF benefits from their research allowance… this is typically NOT allowed and you should query this. First check the literature on your research allowance where these restrictions should be laid out, then talk with your supervisor***

If you’re paid off your supervisor’s grant, you are probably getting a T4 or a T4A Code 04. Best to talk to your HR/finance person about why you’re getting a T4a code 04, they might be able to help depending on exactly which pot your money comes from. If you are getting a T4, the same argument as above applies, you might be getting something good (i.e.: benefits, CPP, EI, etc), so be careful when asking for a T4A because the good things might go away.

In the end, many people have tried with various combinations to get their taxes back (remember that you can file re-assessments for up to three years prior!), and there has been variable success. Personally, from the limited number I have dealt with and been familiar with (and again, this is not to be taken as a rule or truth), either of the following seems to work for out-of-country and BC tax payers:

  1. Get the correct forms (T4A Code 05 and T2202) – no hitches or extra work
  2. Submit a T4A and the amended version of the petition in lieu of a T2202 (from the UofT folks) along with a letter from your program/institute director – again, if you want to see a template of sorts, please contact me

I’ve heard that Ontario taxpayers are having much more mixed reviews, but I am not as keenly aware of the individual circumstances or actual forms submitted. Best to contact CAPS or the UofT PDA.

If you know the situation for any other provinces, please post and share your findings as it will be helpful to connect the disparate PDF community and share your brains without reinventing the wheel.

Next topic(s):

  • Canaries in the Coal Mine
  • (PDF length in medical science and SSHRC ties to economic outcomes)
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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