2012 Taxes for Postdocs: Dredging up the Past

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:

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

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About Dave

David grew up in St. John's Newfoundland, completed a Bachelors degree in Genetics and English Literature (UWO, London, ON) and completed doctoral studies in stem cell biology at the Terry Fox Lab (UBC, Vancouver, BC). He coordinated the UBC Let's Talk Science Partnership Program from 2004-2007. David is currently completing postdoctoral research at the University of Cambridge, UK and also writes for the Canadian Stem Cell Network Blog
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38 Responses to 2012 Taxes for Postdocs: Dredging up the Past

  1. Lance Robinson says:

    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!

  2. Dave says:

    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

  3. Lance Robinson says:

    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!

  4. Lance Robinson says:

    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.

  5. Dave says:

    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!

  6. DT says:

    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).

  7. Dave says:

    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 (see bottom of the attached doc for a tidy summary) 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

  8. Kelly M. says:

    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!

  9. Dave says:

    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.

  10. Emma says:

    Hi,
    the lab I work in as a postdoc might be moving to Canada next year, I have been a bit concerned as based on the pay scales I will be taking a big pay cut ($7000). My boss told me that it would all even out as the panel of academics interviewing him and dreaming up his equipment and consumables ‘golden hello’ told him that I wouldn’t be paying tax. Based on what I saw in Nature a couple of years ago and a pretty basic web search that’s clearly untrue. I’m sure I can shame my boss into paying me somewhere in between the the two salaries, but I thought I should say something because if lab heads or heads of department think postdocs don’t pay tax and are telling potential fellows such it’s a bit out of order and misleading.
    Em

  11. Dave says:

    Hi Em,
    Sorry for the late reply – been a little hectic this last week. You’re absolutely right that you will be paying tax and this has been very clear since 2010. All of the professors and universities should be aware of this. CAPS is doing its best to inform universities and to support postdocs who find themselves on the wrong side of this matter.
    I hope you get your situation straight with your supervisor, if you have any issues, please don’t hesitate to contact me.

  12. Patrice says:

    Hi,
    All of my income comes from my supervisor’s grant and is filed under box 28 on my T4 slip. I am wondering if I can claim the employee amount?

  13. Dave says:

    Hi Patrice,
    Are you on a T4 or a T4a -and what exactly do you mean by an employee amount (are you talking income or cpp/ei)?
    Perhaps it’s best to email me at contact@scienceadvocacy.org to discuss..
    Dave

  14. Saeid says:

    Hi Dave
    Thanks for informative blog. Considering that Tax Court of Canada allowed in HUANG case to appeal, do you think that we have a chance to get back 2007-2009 tax back? Should CRA follow Tax Court by law or they can appeal as well? I am from U of Toronto and got T4a for 2007-2010. Got excemption for EI and CPP.

  15. Patrice says:

    Dave I sent you an email, but yes T4A and No EI or CPP. I meant the deduction given to everyone that reports employment income.

  16. Dave says:

    Hi Saeid,
    As per my note to DT – this is still unclear due to the Chabaud ruling as well as the OHRI defined trainee program (which UofT and others did not have in place). You could try applying, but I imagine you would have to make the case that you were in some sort of recognized training program.
    Sorry I can’t be more help!

  17. Erin says:

    Slight different case but I thought I would point out this year that scholarships and fellowships held on a part-time basis became taxable this year. You are only tax exempt up to and equal the tuition costs and other program related material costs. For complicated reasons I won’t go into here my university will only allow me to register part time. This year my NSERC pgsd is entirely taxable. I know there aren’t many of us who are part time but this was an unwelcome surprise.

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  19. Silvia Vilches says:

    Back to Lance; did you get any resolution on how SSHRC is handling the $5,000 expenses stipend? I have had the same experience and have the same opinion. The $5,000 stipend, expendable over two years and fully accountable to SSHRC with receipts was included in Box 105 of the T4A requiring me to report it as income. SSHRC was quite clear with me when I queried this, referring to “rulings” which had instructed them that it was income. However, CRA was more nebulous, asking me whether the the amount was accountable, i.e. whether I would have to pay it back if it was not expended as granted. Based on the CRA questions, my guess is that there is a case to make that it is an expenses allowance, i.e. research grant, not income. However, given that I had to file it as income and pay tax on it because of the box it was in on the T4A, I see two options. The first is to save the receipts and submit copies to CRA as well as to SSHRC next year, therefore reducing my income by the amount expended. I should therefore pay tax on the amount of income less the expenses, i.e. net income. If that does not work (I’ll reserve savings in case it does not) then I will report to SSHRC the income tax paid as an expense against the $5,000. There is nothing else I can do, unless I pay both the income tax to the government and then cover the expenses with my net income, thereby reducing my income by the amount of tax paid. That is just an Orwellian circle, i.e. insane. I was advised by a friend to submit my filing next year by paper, as I will have more opportunity to explain and justify. The real issue, though, is the uncompetitive and confusing situation.

  20. Michael Reed says:

    Hi. I recently applied to Revenue Canada to have my SSHRC postdoc income from 2011 reassessed to determine if it was EI-insurable. Despite completing my postdoc in Ontario, and receiving extended medical benefits from my university, Revenue Canada ruled that I was NOT an employee of my university and, as such, my SSHRC income was not EI-insurable. Has anyone else petitioned Revenue Canada to reassess their postdoc income for EI-insurability? Has the Ontario Labour Relations Board ruling helped anyone??

  21. Jay says:

    Can someone tell me how many weeks of annual scheduled offs is a postdoc fellow entitled to at UBC?

  22. Jojo says:

    Can someone tell me what happens now that postdocs were ruled emplyees? I am in a bad postdoc situation right now. Are we eligible to any benefits? After the rulling, has anyone had their contract changed in 2012 to include the new status, or know if from a legal point if view we are considered employees even if contract wasn’t changed (can I claim maternity leave?). At UofT there is absolutely no info available on this… Thank you.

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  24. Sarah Jane says:

    Jojo – If you are a postdoc at U of T, and having a hard time, you should contact the postdoc people at CUPE 3902. They were involved in the labour board case and are doing a lot of work getting postdocs access to benefits. I saw a talk where they talked specifically about maternity leave for postdocs who teach. They might be able to give you more info.

  25. Noor says:

    I have got an offer for postdoc in McGill with 55k/year. Can any one tell me about the tax (federal or provincial). Thanks

  26. Doubly screwed! says:

    I thought it might interest (or shock) everyone to also know the following.

    In addition to categorizing “fellowship, bursaries, and scholarships” as taxable income for post-doctoral fellows, the CRA is further NOT qualifying post-doctoral income as “earned income”. This has HUGE implications for anyone trying to contribute to an RRSP.

    Typically RRSP contribution limits are calculated as 18% of your earned income. For some reason, although the CRA believes that although post-doctoral income is taxable income, it does not qualify as income for the RRSP contribution. Thus, post-doctoral fellows are in a significantly WORSE position than a typical employee.

    On a $70,000 income, this means that in addition to having to pay the standard federal taxes, the post-doctoral fellow will also experience an ADDITIONAL LOSS of $12,000 to one’s potential to minimize the taxes via an RRSP contribution.

    If the income is taxed, then one would reasonable expect that the salary would count as “earned income” and receive an increase to one’s RRSP contribution limit.

  27. Jojo says:

    70 000 ? I only know postdocs making 39-45K…

  28. Mark says:

    Hi,
    Does anyone know what the process for holding a 38,000 (or 43,000) SSHRC postdoc at a foreign university would be? It seems I would be paid directly from SSHRC, but does that mean I would pay Canadian taxes on it, and if so what province?

    I’ll be holding the award at Oxford and I’m also a British Citizen (dual). I’m finding it equally difficult to figure out if I need to be paying taxes there as well.

    Any help you can give would be appreciated. The award holders guide simply says SSHRC is not able to advise.

  29. Erin says:

    My situation was a little differnt than yours I held a nserc pgs in the UK. While simultaneously being under contract as a research associate. I paid uk taxes on my research associate income. I contacted H.M. Customs and revenue I was told that because my nserc scholarship was to support my training the UK did not consider it taxable. 

    For reference: http://www.hmrc.gov.uk/manuals/eimanual/eim06210.htm

    A note on taxation between the UK and Canada. There is an agreement between these two countries such that each is supposed to recognize the taxes paid in the other country ie you don’t get taxed twice.

    This meant that the Revenue Canada was supposed to recognize my uk based taxes when I filed my Canadian tax return. In practice this was not the case. I was audited every year I filed- some times more than once. The errors were not mine.  I would recommend having an accountant it makes fighting with Revenue Canada easier. 

    In practice as you will be paid directly from sshrc they will pay you your gross income you will the have to pay all of your taxes to revenue canada in April (I now hold a Nserc administered post doc and this is how it works). The uk tax office will have no knowledge of your income under their pay as you earn system. 

    You will file your taxes in what ever province you last lived in and will be taxed according to their provincial rates.

    Feel free to ask if you have any more questions. 

  30. Mark says:

    Hi Erin,

    Thanks very much, that is very very helpful.

  31. Marei says:

    My situation is reverse of the previous described one. I currently hold a postdoc position in Canada, but have a fellowship from my home country (Germany). It is supposed to be tax free. Upon my question, the founding agency did refer to a tax agreement between Canada and Germany. But the respective paragraph only refers to students and trainees (I’ll attach the respective paragraph). Since postdocs are now not considered student or trainee any more in Canada, I am not sure if that article still applies. Unfortunately, the founding agency assumes that I do not have to pay tax and calculates the fellowship accordingly. I do have to do the tax return here in Canada, and I think I have to report the fellowship as worldwide income. Does anyone knows how to handle fellowships from outside Canada?

    AGREEMENT BETWEEN CANADA AND THE FEDERAL REPUBLIC OF GERMANY
    FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND CERTAIN OTHER TAXES
    ARTICLE 20
    Payments which a student, apprentice or business trainee (including a “Volontaer” or a “Praktikant”) who is, or was, immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

  32. Loan says:

    From my recent conversation with SGS, U of T is considering moving to employee status this year.

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  34. Gal says:

    Just an FYI to Marei and other people who might be in a similar situation.
    My situation is the same. I am an Israeli working as a postdoctoral fellow in a Canadian university, and receive a fellowship from Israel. Israel and Canada have the same Article 20 in their tax convention.
    I spoke to the CRA international division directly and they assured me that postdoctoral fellowships are indeed covered under this article (provided that they are funded by sources from the other country, in my case Israel).

  35. Paul says:

    Do you have to pay tax on CIHR post-doc income if you take it to a US school?

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  38. Eric says:

    As a Canadian going to the USA for a post-doc, if i’m being paid the by US institution I would file/pay taxes in the USA, and then file taxes again in Canada, but NOT pay canadian taxes (as per the tax treaty between the USA and Canada, so that I only pay tax once). Since i’d be living in the USA, i’d be a USA tax resident.

    Now what if I have most of my income coming from Canada from an NSERC PDF fellowship (~$40,000 per year canadian). Would I pay Canadian taxes on that income in the last province I lived in (BC), and then just pay taxes on any extra income I got in the USA (e.g. an extra $10,000 to top up my salary from the US institution)?

    I have a lot of tax credits built up from my years and years as a stupid, so it would be great to pay taxes in Canada rather than the USA.

    Any other Canadians doing post docs in the USA with NSERC funding? How do you pay taxes/who do you pay to? I’m assuming i’ll need to hire an accountant to do my taxes?

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