Last year, one of the hottest topics on the site was Budget 2010 and the new rules regarding postdoctoral fellowships. Those entries are still amongst 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 discrepancy1
- 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.
- The national mid range salary for articling students, according to a June 2004 Canadian Lawyer article, is between $57,110 and $64,970.
- By the fourth year, training accountants in the Government’s own Financial Management Group program are earning between $72,404 and $93,339
- 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.
- The numbers referenced above are pulled from the following sources for medical residents
http://www.carms.ca/eng/r1_program_salaries_e.shtml and lawyers http://www.law.utoronto.ca/students_content.asp?itemPath=2/10/0/0/0&contentId=272 and accountants in the Government’s training program http://www.tbs-sct.gc.ca/pubs_pol/hrpubs/coll_agre/fi/fi09-eng.asp [↩]
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.
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 !
The goverment need to be changed. They should hear our voice.
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%.
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
Pingback: Quarterly Summary: Guest Bloggers are Great! | The Black Hole: Science in Canada, Issues affecting trainees
Hi Dave,
Thanks for your interest and explanation. I am planning to join UofS, Saskatoon as a postdoc, in about 3 months. I am new to the taxation policies of Canada, as I am from India. My salary is in mid40s and I will be a trainee . Could please let me know, what amount or percentage goes away in taxes for both the fed and province? Also, is it a happy amount to survive after the taxes are done? I would appreciate if you can throw some light on this or inform me of any other blogs or sites, as I may consider other offers as well.
Hi Chandra,
I can’t offer tax advice per se, but I can bring to your attention the tax rates in Canada, which as a postdoc you will be required to pay irrespective of trainee or employee status. They are listed on this page http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html
Hope this helps and good luck in your Postdoc decision and eventual position!
Dave
Hi Dave,
Thank you for your great job and information you provided to us
I’m Canadian from Quebec.
and I got a JSPS postdoc fellowship to work in japan 2011 and 2012
I think I’ve to fill my tax declaration in Canada as I’m considered Factual Resident of Canada even I’m abroad. ( I’m trapped)
my JSPS fellowship is tax free in Japan and it’s considered as travel expenses (not considered as salary)
do you have idea on how i should make declaration for such case ? I hope it’s not taxable
Hi Pascal,
Congrats on your fellowship and decision to do a postdoc in Japan – sounds exciting.
As usual, I can’t give out any official tax advice and would advise speaking with an accountant who handles these types of cases, but my suspicion is that because it’s a fellowship, Canada would treat it as income.
What I would suggest looking up is whether or not Canada and Japan have any tax agreements that would allow you to not file in Canada if you are filing taxes in Japan.
Hope that helps!
Dave
Get article. I have been struggling with the ins and outs of post-doc taxes and deductions for the past year. I am a post-doc in PEI and the University here has a “policy” whereby they actually make me pay THEIR share of CPP, EI and WCB. I understand that I will pay tax and my contributions to these entities, but I am astounded that the University actually makes me pay their share. Does this happen other places?
Hi Jen, this doesn’t sound good or fair at all and while I’m not sure if they are allowed to do this (my gut would say no), I just asked a few postdocs who were leaders around the tax and employment issues with their PDAs or CAPS and collectively, the following suggestions for you were made:
1. Call the Canada Revenue Agency (free) and explain your situation – they should be able to give you an answer as to whether or not your university is allowed to do this
2. Contact a tax/employment lawyer – a simple yes/no as to whether or not the university can do it can likely be answered over the phone.
If you get stuck, then definitely contact CAPS to try and get some help (or you can just email me at contact@scienceadvocay.org)
Hope this helps!
Dave
Hi Dave,
Thanks for the reply. I tried to e-mail, but it keeps getting bounced back. I’ll just post my response here.
It is a very frustrating situation. No other employer in the country is allowed to do this the their employees. I have contacted CRA and they said that I need to talk to the Labour Board. As far as CRA is concerned, my T4 (which is for my salary minus
~$5000, because the University takes this off the top to cover their
costs of CPP, EI and WCB) is correct. When I called the Labour Board,
they said to ask CRA. Arrggghh!
Seems that everyone thinks it is wrong, but nobody wants to actually do anything about it. The University is standing firm on their policy. I’m am very unhappy, but not sure what my next step should be. They have basically taken $11,000 away from me in the last 2 years. As you know, a PDF salary is already small and there is a significant portion of it being used to cover ‘university costs’.
If you are not aware of this happening to other PDFs in other provinces, then I think that will add weight to my case. It sounds like I may have to speak with a lawyer. Any other thoughts?
Hi Jen,
I’ve put out a call for help to a couple of friends who might have some insight into this, but as far as I am aware, this does not happen at other universities. When you started your PDF position, did you sign a contract? If so, this might hold the most weight as the CRA has a point about your T4 reflecting your full salary (according to the CRA) whereas it sounds like this doesn’t match up to what you were under the impression was your actual salary.
I will let you know if anyone comes back with anything more insightful, fingers crossed.
(I’ve copied this into an email as well – let me know if you get it)
Dave
I have a friend who has such a iioptson in France, and I know that the competition for them is probably greater than that of full-faculty iioptsons. There are exams to take, proposals, publications, interviews. It sounds daunting. In Israel, there are many so-called technicians who are really PhD/postdocs who either could not go abroad for real postdoctoral training for family or other reasons, or were not suited to be principal investigators anyway. This is obviously very helpful in a country where it is hard to attract foreign postdocs, but it goes back to the same problem they are really being used by the system underpaid and not receiving the respect that they have earned. When I was still considering a career there, and interviewed for iioptsons, I was offered such-and-such start-up and half a technician . I couldn’t hold in my cynicism, and asked The legs or the torso? Seriously, one way to promote more iioptsons for qualified postdocs (in the US) would be to grant funding to such researchers for use as their salaries in someone’s laboratory. I’m sure there are ways to promote this, but it’s all a question of money
Hi Dave and Jen,
I am wondering whether the same will happen to me. I am registering as a postdoc at UBC in Vancouver, BC, and the information on UBC website, http://www.hr.ubc.ca/faculty-relations/recruitment/titles-ranks-descriptions/postdoctoral-fellows/pdf-employees/, says that “by law deductions are taken from the salary for Canada Income Tax, Canada Pension Plan (CPP) and Employment Insurance (EI)”.
I am also wondering whether BC exempts postdoc stipends as QC does (at least in the case of McGill University which issues for Revenu Québec a Relevé1 with the code RB) , do you know about that?
Guillaume
Hi Guillaume,
As a postdoc in Canada, you will be required to pay income tax on your fellowship. CPP and EI varies between institutes, but it looks to me like UBC has made it very clear what their policy is. It might depend if you are based at one of the affiliated institutes or not (as some are not on UBC payroll), but every postdoc will definitely pay income tax.
BC does not exempt postdocs either as far as I am aware.
Wish I had better news!
Dave
Hi Guillame,
The thing that you have to ask about specifically is what portions of EI and CPP are being taken from you. It is completely normal for you to pay the employee portions of CPP and EI as you are treated as an employee of the University. You need to ask whether they are making you pay the employer portions of those deductions. Technically the employer (UBC) should be responsible for their portion, but that is not always the case. I would make sure you have a clear answer from UBC on this issue before you sign a contract.
Cheers,
Jen
Hi Jen and Dave,
Thanks for your comments. Here is an update on my case as I have received my first paycheque. CPP (4.95%), EI (1.83%), and WCB (0.18%) are deducted; they are the employee portions (CPP, EI). Including income tax, the average tax rate seems to be 20% for a postdoc at UBC in BC. In comparison with being a postdoc at McGill in QC last year, the average tax rate was 10%.
I don’t mind paying EI and CPP provided that I am eligible for the benefits. Regarding EI, international postdocs, as every temporary resident with a work permit, seem not to be eligible according to some stories I read on forums, such as here. Regarding CPP, according to comment #13 in the thread here, I may be eligible to claim CPP when I will be 65 (it may be related to International Benefits, see here).
Cheers,
Guillaume
Hey everybody
I will recive my PhD at the end of the year. I got an offer for a postdoc fellowship in Montreal wich is pay around 36.500 $ before taxes. Since I don’t know the Canadian system I really don’t know what to expect as net salary.
My question for you are:
How much will I take home after taxes ?
I used the online calculator which gives a final net salary of 29.00 (for Quebec), is this number resonable ?
Is the medical insurance included or I have to pay extra money ?
Thank you in advance and I apologize if this is not the right place to post such a question (in case just remuve my post but please suggest me a place where to post it).
Best regards and wishes to all
Fabio
Hey Fabio,
This is best addressed by the human resources people at your institution as the
provinces each have their own taxation policies and health plans/structure. I would expect to pay the national tax rate on your award, and unless told otherwise, I would also expect that some deduction or fee will apply to be a part of the medical coverage.
Does your institution have a postdoctoral fellow association? If so, this might be a good place to look for some answers.
Dave
Thank you Dave for your answer,
I just want a rough indication, just to know if i can hope something around 30.000 after taxes or much more less, because if it’s something around 20.000 I will consider to look somewhere else.
Fabio
Hi Dave (and others),
I just spend the past two years as a postdoc overseas, and revenue Canada is considering me as a non-resident for that period, which basically means that in 2011 on $20,000 of Canadian sourced income I have to pay $4,400 in Canadian income tax (irrespective of the fact that my base salary that year was below $33,000 and that I was supporting my wife and our baby, who was born in the UK.) That seems wrong to me. In general, are Canadian postdocs doing a stint overseas considered factual residents for income tax purposes?
Anyway my advice to any Canadian postdoc going overseas: GET AN ACCOUNTANT.
Nick
Hi Fabio – sorry for the delay. I would expect that you’ll be in the $28-30,000 range… but again, it depends on the deductions you can make, etc. Definitely seek the advice of the HR people.
@ Nick – agreed completely re: getting an accountant. Overseas taxes are crazy… but definitely look into agreements between countries – Canada has agreements to not double tax people with many countries across the world…
Hi Dave and Jen,
Found this website because I am a postdoc at the University of Waterloo and they are essentially making me pay the employer portion of the CPP and EI as well! I have a fellowship from Mitacs, which they take right off the top their CPP, EI, and other benefit premiums and leave me with the rest from which I have to pay my portion of CPP, EI, and income tax. All in all 34% of my fellowship does not go to me!
Jen, did you get anywhere with this situation? I think I need to contact someone about this; it just doesn’t seem right!
Chris
Hi Chris,
Yup – that is exactly what UPEI did to me. I tried to sort it out with the University, but got absolutely nowhere with them. They couldn’t even understand why I would have an issue with their ‘policy’. In the end I filed a complaint with the Labour Standards Board. After a rather drawn out process, the University agreed to pay me back the deductions for their portion of CCP, EI and WCB (roughly $5000!) and agreed to pay their share until the end of my post-doc.
Have you spoken to anyone at the University about this? Hopefully they will be more understanding. It may also help you to contact Mitacs. The group that sponsors my fellowship had no idea that the University was making the deductions, and they were not pleased to hear it. They voiced their concerns to the university and I suspect that this made the university take the situation a little more seriously.
Good luck with it all!
Cheers,
Jen
Hi Jen,
Thanks for the response and I’m glad that you got somewhere! I did speak to Mitacs and while they didn’t seem to necessarily support the position of the University, they also say they don’t make a habit of getting involved with how the University distributes the funds. What a familiar situation; my University also cannot understand why I would have an issue with the practice. Apparently they view the fellowship as “theirs”, so to them it appears reasonable to take their component of deductions out of that pool of money.
I am encouraged by your story and will speak to someone higher up the chain in the University and failing that I will go to the Labour Standards Board as well.
Chris
Pingback: The Black Hole | Inaugural Meeting of Canadian Postdoctoral Administrators: will fanfare = results? | University Affairs
Sounds like the money is gone… went through the University, Ontario Ministry of Labour, and Canada Revenue Agency and apparently it is totally fine to pay employer CPP and EI out of postdoctoral fellowships!
Chris
Pingback: The Black Hole | 2013 taxes for Canadian postdocs: The goal is consistency | University Affairs