February 9, 2010
At CAPS we have been getting a lot of inquiries about the letter we filed to the CRA asking for clarification on the tax status of postdocs in Canada. To date, we have received no official reply or clarification on this issue. We realize that this is a serious situation for many postdocs who are looking to file their 2009 taxes without any idea on how the CRA will treat our income. For that reason, the CAPS committee have drafted a letter that a postdoc can choose to include with their 2009 taxes that outlines our concerns and some of the history of the tax situation.
Please feel free to either download the document here or copy and paste the information below.
Read the letter carefully before you choose to use it. We also encourage you to personalize the letter to include the situation at your own particular institution. We are continuing to work on your behalf to resolve this issue, and we hope that this letter may be useful to some postdocs.
The following information is provided by the Canadian Association of Postdoctoral Scholars (CAPS) with no warranty whatsoever. The tax situation around PDF is presently unclear. The members of the CAPS executive are not lawyers or tax accountants, and this document is not intended as legal advice. It is merely a guideline reflecting the clearest arguments supporting the right of PDF to claim the recently-introduced exemption for scholarship & fellowship amounts on line 130 in the income tax guide that CAPS has been able to develop. CAPS does not have an official position as to whether or not PDF should claim this exemption, that decision is up to the individual PDF. It may also be advisable to contact a tax professional. Should you decide to claim this exemption, we suggest you may wish to consider the following:
The full Bekhor v. M.N.R. ruling of the Tax Court of Canada cited in the letter is available at:
Canadian Association of Postdoctoral Scholars
February 1, 2010
Petition to be granted the T4A Scholarship / Fellowship Income exemption
Recent changes in the declaring of Scholarship and Fellowship income on line 130 do not explicitly define the eligibility of individuals such as myself who are undertaking post-doctoral studies (“Post-Doctoral Fellows” – PDFs). Although no officially recognized definition of a postdoc exists in Canada, a national working group on the subject has come up with the following interim definition;
A postdoctoral fellow / scholar is an individual holding a research doctoral degree (or medical professional equivalent) in a temporary period of mentored research and advanced training, linked to a university or an affiliated institution, to acquire competencies for an independent research-intensive career.
I have claimed the exemptions in question for the following reasons (specific justification below).
The INSERT ACADEMIC INSTITUTION HERE is recognized as a "qualifying educational institution" by the CRA. PDFs are considered to be trainees - not employees - by the University, in what is referred to as the "Postdoctoral fellow training program", and are paid as such. Income is received as T4A Scholarship / Fellowship income, rather than T4 "earned" income, and PDF do not receive benefits of any type [CUSTOMIZE FOR YOUR SITUATION other than a recently-instituted PDF-paid health plan END CUSTOMIZATION], are not eligible for employment insurance / federal parental leave, or worker's compensation in case of injury, and are not eligible for RRSP or CPP contributions. The training is primarily research-based, but also includes exposure to advances in the wider scientific community through a variety of departmental and institutional seminar series. The Tax Court of Canada, in Bekhor v. M.N.R., has previously ruled that the status of a PDF "...was one of advanced student and professor, not one of employee and employer. The stipend received was in the nature of financial assistance provided to a learning postdoctoral fellow, not remuneration for services rendered by an employee to an employer. (Citation 2005TCC443, paragraph 39)"
Per CRA publication P105(E) Rev. 06, entitled "Students and Income Tax", a qualifying educational program is defined as: "...a program that lasts at least 3 consecutive weeks and requires a minimum of 10 hours of instruction or work in the program each week (not including study time). Instruction or work includes lectures, practical training, and laboratory work. It also includes research time spent on a post-graduate thesis.", which description clearly covers post-doctoral studies. Exclusions are then listed in the following paragraph as "A program is not considered a qualifying educational program if the student receives, from a person with whom he or she deals at arm’s length, a grant, reimbursement, benefit, or allowance for that program. However, these amounts do not include the amounts listed in the Notes on page 21." where the amounts listed in the Notes on page 21 of that bulletin include "...any scholarship, fellowship, bursary, or prize...", thus PDF T4A Scholarship / Fellowship income clearly qualifies under this designation.
Finally, it is my understanding that the intent of this legislation is to encourage participation of highly qualified individuals in higher education by providing tax relief to partially compensate for the income sacrificed in order to pursue this training. Participants in a PDF training program undertake substantial reductions in earning potential in order to do so. Based on 2004 data from the United States, median income for PDFs ranks between that of high school graduates, and individuals with a Bachelor's degree, or slightly over half the median income for individuals with a Doctorate in society as a whole‡. In comparison, the minimum postdoctoral stipend is $28,100, roughly half of the minimum salary assigned to Scientific Associates, who are employees. This is clearly not a case of individuals employed at a salary commensurate with their level of training looking for a tax loophole, but rather bona fide trainees receiving scholarship / fellowship funds in order to support an educational program, as envisioned in the legislation providing for these exemptions.
Thank you for your assistance in this matter. If additional documentation would be helpful, please do not hesitate to contact me. In order to ensure the accuracy of this decision, please also ensure that it takes into account the results of the request for an official ruling on this matter by the Canadian Association of Postdoctoral Scholars, filed in February 2009 (document # 2009-030856).
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‡ Median incomes:
l Professional Degree: $72,000
l Doctoral Degree: $71,000
l Master's Degree: $55,950
l Bachelor's Degree: $45,000
l Postdoc Survey Respondent: $38,000
l High School Diploma: $28,600
Data drawn from http://www.sigmaxi.org/postdoc/highlights.pdf. PDF data from a comprehensive survey of 7,600 PDFs across the United States, comparative data from 2004 U.S. Census
Full reference: Davis, G. 2005. Doctors without orders. American Scientist 93(3, supplement). http://postdoc.sigmaxi.org/results/