taxes, ugh

Taxes, man. Ugh!

Paying your taxes as a grad student here in Canada is fairly straightforward. You generally don't have very much money to be taxed, scholarships are tax-free,and you get to claim tax credits for tuition. Most students will find themselves with a decent refund after tax season. Which will probably be spent all on beer and nachos, thus stimulating our economy, and completing the circle of life for Canada's national bird, the loonie.

Since joining the ranks of the working world as a postdoc, I have come to the cold, nasty realization that taxes are actually kind of a huge pain in the butt to deal with. Now, I fully concede that taxes are A Thing That Adults Do. But the system seems especially confusing for postdocs! This is because of three reasons:

1. Postdocs in Canada are a transient, heterogeneous and tiny group- every postdoc is supported through wildly different fellowships or grants, and the nature of the job changes quite a bit between supervisors, universities and disciplines, etc. In fact, there's quite a bit of uncertainty across Canadian universities whether or not if postdocs should be classified as employees, trainees or independent contractor, which can complicate the tax situation quite a bit. Postdocs are only around for a few years, tops, and are generally focused on moving onto the next step as quickly as possible-- there are some university/departmental resources for postdocs to access for things like tax advice, but nothing comparable to what's offered to students.

2. Due in part to the complexity of taxation issue for postdocs, the funding agency that gives me my salary for my fellowship (the National Science and Engineering Research Council, NSERC) sends me my salary in 6 month chunks, with absolutely nothing deducted from it. No federal or provincial income tax, no unemployment insurance (EI), no Canada Pension Plan (CPP). It's a pretty sweet feeling to hand a bank teller a giant cheque like that (and seems to always garner some excellent customer service...), but it's 100% up to the postdoc to figure out how much money to set aside to pay their taxes and make sure they budget the rest to last the whole 6 months. I have a few friends who had no idea they were supposed to save anything for their taxes and had to scramble to cover their tax debts.

3. A few years ago, the Canada Revenue Agency (CRA) ruled that all student fellowships are tax free, whereas postdoc fellowships are fully taxable (before that, some postdocs did not pay any taxes!). The net result is that an NSERC-supported postdoctoral fellow receives less take-home salary than an NSERC-supported PhD student with a Canada Graduate Scholarship, which is kind of crazy (especially considering that many universities top up CGS students to cover tuition, etc.). The thing is, NSERC (or any of the other government funding agencies such as CIHR, SSHRC, etc.) didn't decide this-- the CRA did. NSERC and the CRA aren't the same entity, despite their peripheral relationship-- it's like complaining to the bookstore that your professor picked a terrible textbook for your class. As much as I like to complain about stupid issues in academia, I much preferred figuring out what I needed to do and executing my plan.

Having filed my taxes for 2012, I offer the following tips for any other postdocs in a similar position. This isn't intended as actual legal tax advice (or am I anything close to a qualified accountant), only as a guide to get you started. If you are concerned about your tax situation, it may be worth your while to call the CRA (who are typically exceedingly helpful) or consult with an actual accountant who actually knows what they are doing.

 Tax Tips for Tricouncil-Supported Postdoctoral Fellows (e.g., NSERC, CIHR & SSHRC):

1. Plan ahead! As soon as you get your salary cheque, set aside the money that you think you'll need to pay your taxes. Add a little extra just to be sure. I saved $7,500 ($3,750 per cheque), (based on this calculator) and put it in a separate account with PC Financial, a no-fee banking account that gives pretty good interest (right now they're offering 2.6%, which will net you ~$150 or so for your patience). You may also be on the hook for any taxable benefits that your supervisor pays (such as vision/dental) which are harder to predict. Setting aside the money ahead of time means you won't have to worry come April.

 2. Make sure you know your employment status at your university! It seems like every university in Canada classifies their postdocs differently. Check with the Human Resources department at your school, or if your school has them, with your Postdoctoral Association, postdoc union or Postdoctoral Fellow's Office (I've linked the corresponding sites for the University of British Columbia that were helpful for me). At UBC, my fellowship means I'm designated as a trainee, which renders me ineligible for programs such as EI and CPP. Which is kind of crappy if I think about it too much, but also means I don't have to pay any extra taxes- this would probably be about an extra ~7% or so.

3. If you did your PhD in Canada, you may be eligible to claim tuition tax credits, which you can find out from last year's return. This may save you a ton of money, but sadly it will likely be the last year you'll ever get to claim them, boo.

 4. If you moved to take up your postdoc, you may be eligible to claim moving expenses as long as they weren't reimbursed by your department. Be forewarned that the CRA is very likely to audit your return if you claim moving expenses, so make sure you have all of your documentation on file. I got audited for my move last year, and it was a hassle, but didn't cost me anything extra.

 5. I prepared my return using the well-designed and free SimpleTax-- I'm sure the other software out there is also good.

 If I've got anything wrong with these tips, or if you have any advice of your own for postdocs filing their taxes, please let me know in the comments!