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Residents ≠ employees according to CRA (updated!)


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Received a letter from the Canada Revenue Agency stating that medical residents are considered employees and not students, and therefore tuition/education amounts cannot be claimed. Curious if this is a new change in policy, and whether anyone else has received something to this effect...

 

It's certainly new, if it's not a mistake.

 

My guess is it's someone who is unfamiliar with residency (some intern or new person on the job) who flagged it. Residents have gotten tuition tax credits for years from the CRA.

 

I would talk to your accountant or tax lawyer.

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Here is what I found from the CMA residency tax tips document:

 

Tuition Fees and Education Tax Credit

Tuition fees paid during medical school or a residency program are not deductible but may be eligible

for the "tuition tax credit". Obtain Form T2202A from your university to determine allowable tuition costs.

Keep in mind that fees paid for admission, application, use of library or laboratory facilities,

examinations (including re-reading) and diplomas, as well as mandatory computer service fees and

certain academic fees qualify as eligible tuition fees. Other tuition fees (i.e., for ATLS courses, certain

LMCC preparation courses) may also qualify for the tax credit. Contact the course administrators for

further details and be sure to obtain appropriate documentation for these courses from them.

In addition to the tuition tax credit, students may also claim an education tax credit. Although full-time

medical students can generally claim a federal education tax credit of $400 per month ($120 per month

for part-time students), this benefit has not always been available for residents who were considered to

be pursuing post-secondary education in relation to their current employment. The March 23, 2004

federal Budget removed this employment restriction, so those residents in an otherwise qualifying

educational program may be eligible for the education tax credit for the 2004 and subsequent taxation

years, provided that no part of the education cost is borne by or reimbursed by their employer.

Generally, you cannot claim the education amount if you:

• received a grant or were reimbursed for the cost of your courses from your employer or

another person with who you deal at arm's length, other than by award money received;

• received a benefit as part of a program (such as free meals and lodging from a nursing

school); or

• received an allowance for a program such as a training allowance.

For further details, please refer to the following link: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncmtx/rtrn/cmpltng/ddctns/lns300-350/323/menu-eng.html or consult your provincial house organization

(e.g., PAR-A, PARI-MP, PAR-O, etc.) or tax advisor.

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Thanks guys, that's what I thought - I like the part in the CMA Tax Tips about how CRA employees can give incorrect info but citizens have no recourse...

 

The letter I got was actually in response to me sending my T2202A form in as they had requested. I'll phone for clarification - my main (hopefully remote) worry is that they'll not only stand by that decision but try to claw back previous years :P

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  • 2 weeks later...
No, CRA stood by their decision and basically said the only option was to mount an appeal. According to PARO, this year a larger proportion of residents have encountered this problem - they have said they are working on this issue, and I am not sure when residents will hear back with advice.

 

So what we have learned from all this is that CRA has no consistency in their decisions/rulings, ignores precedent and tax policy is made at the whim of whatever mid level bureaucrat picks up your file.

 

Awesome. Sounds like another top notch government department........

 

Remind me to feel guilty when I bill the **** outta the government when I'm staff. *obvious sarcasm*

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  • 4 months later...

I wanted to revive this topic for the current tax season. Like some other residents, I was reviewed last year and told, "a medical resident is considered to be an employee and not a student..." Because of this, I lost out on a considerable amount of credit, which other residents seemed to obtain.

 

Going through my return this year, it seems like a difference of at least $1,900 if I enter in my T2202A and apply for the additional education credits that a full-time student is entitled to. I guess I'm wondering if I should try my luck at applying for these credits again this year, hoping that perhaps someone else might review my file, or if I should just skip it and take what I can get back through my RRSP contributions, CMPA, charitable donations, etc.

 

It's tempting to just leave out the T2202A since I know I'll get a refund much more quickly. Last year, it was a drawn out process with a lot of back and forth, mailing copies and T-slips, etc. That being said, an extra $1,900 would be nice too!

 

Curious what others are doing/have been told about this.

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Claim them. See the recent message from PARO below.

 

You should also submit a T1 adjustment request for any previous year you were a resident and did not claim them. You're entitled to the credits. The adjustment is really not that difficult or time consuming to do.

 

PARO Wins at the Tax Court of Canada

 

The Tax Court of Canada has ruled, again, that residents are entitled to claim the Education Tax Credit and Textbook Tax Credit under the Income Tax Act.

 

Since amendments to the Income Tax Act in 2005 (removing the previous disqualification for individuals who were employees while enrolled in a qualifying program), most PARO members have been able to claim an Education Tax Credit and a Textbook Tax Credit when they file their personal income tax returns. In 2009, however, the Canada Revenue Agency (“CRA”) began denying the credits to some of our members. At the time, the CRA argued that residents were not entitled to the credits because they did not pay tuition fees. Since the CRA’s denials threatened to affect many PARO members, PARO appealed the denials to the Tax Court of Canada. PARO won the 2009 appeal.

 

Fast forward to last year, however, and, once again, the CRA began denying the credits to some PARO members. This time the CRA made different arguments, including that residency programs were not the kind of “qualifying educational programs” that were eligible for the credits. The CRA’s primary argument was that any of the time that a resident is paid to train should not be counted as eligible time required to claim the credits.

 

PARO again challenged the CRA, again appealing the new denials to the Tax Court of Canada. In January the appeal was heard by the Chief Justice of the Tax Court of Canada. PARO's legal counsel argued our case well and we believed that the Chief Justice understood our position.

 

We have just learned that we were successful in our appeal. This is a great decision for our members, and for residents across Canada.

 

Any PARO members who have been denied the credits and who have objected to or appealed the denial should bring the decision to the CRA’s attention. The decision is only binding on the CRA as it relates to the individual residents who appealed. The CRA cannot be required to apply this Tax Court decision to the cases of other individual residents. However, the decision should help you to demonstrate to the CRA that it is required to grant the credits to other residents as well.

 

This is a great achievement and we hope that this time the CRA will treat residents who claim the credits consistent with the Tax Court’s decision.

 

We will be in contact with members who we have been assisting with their credit denials to offer any guidance we can on your next steps. This win is in large part a success of the dedication of our legal counsel, and PARO Staff, who prepared and advocated on our behalf.

 

As always, please let me know if you have any questions.

 

Kind regards,

 

John Centofanti

PARO President

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so what does this ruling change? if residency tuition amounts are a few hundred dollars, we get to knock this off of taxable income?

 

It means you can claim a T2202a from you university. Which is tuition plus $400 a month in claims. Gets you back over $900.

 

You always could claim it but the CRA was very inconsistent in letting it go through. Most of the time it did but occasionally someone would get denied. This lends further weight to the argument that the claim should be approved.

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It means you can claim a T2202a from you university. Which is tuition plus $400 a month in claims. Gets you back over $900.

 

You always could claim it but the CRA was very inconsistent in letting it go through. Most of the time it did but occasionally someone would get denied. This lends further weight to the argument that the claim should be approved.

 

haven't gotten one of those yet - are we considered full time or part time students? Sounds full time by what you are saying.

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  • 4 weeks later...

In case anyone is interested... I was able to successfully re-claim my education and textbook tax credits from 2012 (my PGY-2 year) and already received the refund which was deposited into my bank account. It was a very straightforward and quick process, done electronically with the "My Account" tool.

 

However, for whatever reason, my 2013 return has (again) gone into pre-assessment review. I suspect they are planning to deny the credits, so I sent the CRA my T2202A and a copy of Kandasamy v. The Queen with a strong note urging them to grant post graduate medical trainees the education tax credit and textbook tax credit. I suppose if they deny it I will just put in another re-assessment claim, since it seemed to work last year, but this is getting a bit ridiculous.

 

Please tell me I'm not the only one they are still hounding about this? Alberta resident, if it matters.

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  • 1 month later...
In case anyone is interested... I was able to successfully re-claim my education and textbook tax credits from 2012 (my PGY-2 year) and already received the refund which was deposited into my bank account. It was a very straightforward and quick process, done electronically with the "My Account" tool.

 

However, for whatever reason, my 2013 return has (again) gone into pre-assessment review. I suspect they are planning to deny the credits, so I sent the CRA my T2202A and a copy of Kandasamy v. The Queen with a strong note urging them to grant post graduate medical trainees the education tax credit and textbook tax credit. I suppose if they deny it I will just put in another re-assessment claim, since it seemed to work last year, but this is getting a bit ridiculous.

 

Please tell me I'm not the only one they are still hounding about this? Alberta resident, if it matters.

 

I submitted my T2202A for years 2011 and 2012 and I got refund from CRA. HOWEVER, my 2013 tax went to the pre-assessment department as well and they actually decline to give me education credit for the year 2013 based on the T2202A. It's very annoying that they approved the previous years, but declined this year!!!!

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I submitted my T2202A for years 2011 and 2012 and I got refund from CRA. HOWEVER, my 2013 tax went to the pre-assessment department as well and they actually decline to give me education credit for the year 2013 based on the T2202A. It's very annoying that they approved the previous years, but declined this year!!!!

 

You can file an objection with CRA within 90 days of receiving your notice of assessment. It sounds like they've made a mistake, so it may not be a bad idea.

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I submitted my T2202A for years 2011 and 2012 and I got refund from CRA. HOWEVER, my 2013 tax went to the pre-assessment department as well and they actually decline to give me education credit for the year 2013 based on the T2202A. It's very annoying that they approved the previous years, but declined this year!!!!

 

This is a mistake. File an objection. It is within your rights to claim T2202A in total.

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You can file an objection with CRA within 90 days of receiving your notice of assessment. It sounds like they've made a mistake, so it may not be a bad idea.

 

Thanks for the quick reply!

 

I called CRA this evening. According to the CRA agent I spoke with, she said that I'm not the first person that called her today regarding the same issue. She also told me that the CRA have not yet made it clear to their employees about how to deal with residents claiming T2202A. Apparently, there are some development in the issue, but she wasn't authorized to give me the details.

 

In any case, she actually advised me to file T1 adjustment application and site the "Kandasamy v. The Queen" case in my letter. She said that CRA should reply to this request within 5 weeks. If that doesn't work, she said to file for an appeal (i.e. Objection).

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