Income tax filing and benefits take-up - Challenges and opportunities for Canadians living on low incomes - Prosper Canada
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Income tax filing and benefits take-up Challenges and opportunities for Canadians living on low incomes
Acknowledgements
This report was developed by Prosper Canada How to cite this report
thanks to generous funding provided by Intuit Please use the following citation when
Financial Freedom Foundation. We would referencing this report:
like to gratefully acknowledge the invaluable
Bajwa, Uttam. “Income tax filing and benefits
contribution of the report author, Uttam Bajwa
take-up: Challenges and opportunities for
as well as Lillian Knorr, Salima Shariff, Philippe
Canadians living on low income.” Toronto:
Raphael, and Prosper Canada team members,
Prosper Canada. 2019.
Elizabeth Mulholland, Allison Meserve, Julie
McFayden, Simi Khosa, Nirupa Varatharasan,
and Alex Bucik.
We would also like to extend our sincerest
appreciation to all of the survey participants
and individuals who shared their experiences
in key informant interviews. Their generous
contributions and insights form the basis of
this report.
2 Prosper Canada | Income tax filing and benefits take-up 2019Table of Executive summary 04
Contents Introduction 07
What are the barriers? 10
Who is most affected? 19
Opportunities to increase benefit
take-up through income tax filing 26
Conclusions 38
Endnotes 40
Appendix 1 – Survey 45
Appendix 2 – Key Informant Interviews 46
Bibliography 47
3 Prosper Canada | Income tax filing and benefits take-up 2019Executive
summary
Since the late 1990s, This shift is generally seen as positive While income tax filing can be challenging service providers offering tax support – as
as it harmonizes federal and provincial for some Canadians, people with low well as opportunities to help people with
federal and provincial benefits, takes advantage of an existing incomes face particular barriers. There is low incomes file taxes and access income-
governments have made application process most Canadians substantial media coverage, anecdotal boosting social benefits. This report draws
increasing use of the tax already complete each year, and reduces evidence, and personal insight into what on evidence from a survey of 321 financial
the stigma associated with receiving those barriers are, but little systematic empowerment experts, interviews with
system both to establish
social benefits. However, the income tax research into challenges around tax filing 10 tax-filing experts, and a newspaper scan.
eligibility for benefits and system is challenging to navigate and not in the Canadian context. As a result, this
to deliver them. all Canadians who should be are filing. report is aimed at better understanding
Many who do file still miss out on benefits the barriers to tax filing for Canadians on
for which they may be eligible. low incomes -- from the perspective of
4 Prosper Canada | Income tax filing and benefits take-up 2019Executive summary
Barriers
Survey respondents were asked to 1 Not 4 C
hallenges accessing 6 F ear, mistrust and 9
Mental health and
identify what they believe are the understanding existing supports lack of confidence cognitive barriers
most significant barriers to tax filing what to do Free tax clinics Related to knowledge Related to knowledge
for Canadians living on low incomes. These include eligibility may be too far barriers, survey barriers, respondents
The most cited barriers were: awareness (not knowing away and potential clients respondents mentioned identified specific challenges
that there are benefits may not have access to that people might feel around understanding tax
they may be eligible for), safe transportation, child intimidated by the tax information for people with
low financial literacy, and care, or time off work to system, be afraid that filing cognitive barriers. This was
challenges understanding attend them. This is also taxes will draw government sometimes also connected
complex tax forms. related to geographic scrutiny, and worry that to mental health challenges.
isolation and challenges they will make mistakes. More generally, poor overall
2
Not knowing where
around limited mobility. health or well-being limits
to get tax help 7 Literacy, numeracy
In addition, Canadians and language barriers
people’s ability to file taxes.
People may not know that
without computer access 10 Precarious housing
they are eligible for free The income tax system is
may not be able to take
tax clinics or that free tax challenging to navigate Sometimes
advantage of free online
clinics even exist. and requires strong connected to
tax return software.
English or French literacy “disorganization”,
3 H
igh cost of
5
Problems assembling – a challenge for people the particular challenges
commercial tax help
documentation with cognitive barriers, of people with precarious
Commercial tax services
Many survey respondents newcomers, and anyone housing or who move
can be too costly for
said that “disorganization” with low English, French or frequently were mentioned
households on low
is a key barrier. This was numerical literacy. by several respondents.
incomes. This is a
often related to challenges 8
Tax filing is a
This includes challenges
particular barrier faced by
attending tax appointments low priority
receiving, safely storing, and
people who are not eligible
and problems assembling assembling documentation.
for traditional free tax Respondents were very
tax documents like income
clinics – like self-employed sensitive to the many other,
slips, previous years’
people or people with pressing challenges people
assessments, and
complex tax situations. living on low incomes might
forms needed for
be dealing with. Given this
benefits eligibility.
complexity, tax filing is
often a low priority.
5 Prosper Canada | Income tax filing and benefits take-up 2019Executive summary
Priority groups with Opportunities
unique tax situations
Through the survey, the literature on tax filing and a scan A number of general areas and directions for improvement emerged from the survey. These areas suggest promising
of newspaper articles, we identified four groups with directions for government agencies, community service providers, commercial tax filers, and public schools to
unique tax situations: explore to address challenges around tax filing for people with low incomes. These directions are as follows:
1. Indigenous Peoples Make the tax system easier to Strengthen and expand existing Address broader cultural and
2. People with disabilities understand by community-level supports by educational barriers to tax filing by
3. Newcomers • implifying the income tax
S • upporting community tax
S • Integrating tax filing with other
system to make it easier for clinics by providing more financial empowerment efforts
4.
Self-employed individuals with low incomes
people to understand and funding, better training • roviding more financial
P
These groups also demonstrate the very complex file their taxes – this includes opportunities for volunteers, inclusion education and
situations that people with low incomes can face when automatic filing increasing their number and supporting numerical literacy
tax filing and how these challenges intersect. reach, and enhancing their
Improve the general public’s (numeracy) in schools
services so they can offer longer
awareness of benefits and • ddressing the fear and
A
hours or child care
benefits eligibility by intimidation associated
• L aunching awareness campaigns • reating culturally appropriate,
C with tax filing
that promote tax filing, specific targeted supports
benefits, and tax filing clinics • Improving coordination
• eveloping screening tools to
D between agencies
help people more easily identify • E xploring private sector
which benefits they are eligible for opportunities and collaborations
6 Prosper Canada | Income tax filing and benefits take-up 2019Introduction
In Canada many benefits aimed While income tax filing can be challenging for all Canadians, This report highlights the particular challenges of four
people with low incomes face particular barriers to accessing groups: Indigenous Peoples, newcomers, people living with
at people living on low incomes their tax refunds. There is substantial media coverage, anecdotal disabilities, and self-employed individuals with low incomes.
are administered through evidence, and personal insight into what those barriers are, but It also considers some promising existing programs and
the income tax system. This little systematic research into challenges around tax filing in the opportunities to better serve the income tax-filing needs of
Canadian context. As a result, this report aims to communicate Canadians with low incomes. Building on Prosper Canada’s
means filing taxes is a critical
the barriers to tax filing for Canadians on low incomes, from the 2015 report Accessing Income-Boosting Benefits Through
step in accessing benefits that perspective of service providers offering tax support, as well as Tax Filing, this report proposes a number of ways to improve
have the potential to boost opportunities to help people with low incomes file taxes and, as benefits take-up.1
household incomes. a result of filing, access income-boosting social benefits.
7 Prosper Canada | Income tax filing and benefits take-up 2019Introduction
Context: Income tax
filing and benefits Since the late 1990s, federal many who do file still miss interviewees, and other reports with disabilities can qualify
take-up in Canada and provincial governments
have made increasing use
out on benefits they may be
eligible for.3, 4, 5
suggests that this number may
be high. Richard Shillington,
for a maximum of $70,000
in federal funds through the
of the tax system both to a social policy researcher, Canada Disability Savings
The Canada Revenue Agency
establish eligibility for benefits estimates that between five Grant and up to $20,000
(CRA) does not share data on
and to deliver them. This shift and 10 per cent of families through the Canada Disability
tax-filing rates or benefit take-
is generally seen as positive as living on low incomes are not Savings Bond, which is aimed
up numbers. Nevertheless,
it replaces multiple application getting the benefits to which at Canadians with low incomes.9
feedback from volunteers,
processes with annual tax they are entitled.7
workers at tax clinics, and Tax refunds are often the single
filing that most people already other frontline social service Not filing or incorrect filing largest lump-sum payment
undertake. It also facilitates organizations plus data from can mean lost income. Based a low-income household will
harmonization of federal and the few surveys and studies on the CRA child and family receive each year. Households
provincial benefits. Because that exist, show some tax benefits tool, tax credits have can use these refunds for
most Canadians tax file, it
filing trends. Tax-filing rates the potential to make up big-ticket purchases and for
can also eliminate the stigma
are highest for seniors and as much as 50 per cent of a savings, especially to smooth
associated with receiving
individuals with children and household’s income.8 People finances during periods
social benefits through
lower for young singles and must also file to establish of income fluctuation and
separate, designated and, newcomers.6 eligibility for government financial shocks.10, 11 There
some would argue, more
We have even less data on grants and matching dollars is also strong evidence that
intrusive processes. However,
how many Canadians are filing for savings programs, such take-up of specific benefits
the income tax system is
but missing out on income- as the Registered Disability improves the health and
challenging to navigate and
boosting benefits. Evidence Savings Plan (RDSP). Through economic well-being of
not all Canadians file and
from survey respondents, the RDSP, eligible people families and children.12, 13, 14
Tax refunds are often the single largest lump-sum payment a low-income household will
receive each year. Households can use these refunds for big-ticket purchases and for savings,
especially to smooth finances during periods of income fluctuation and financial shocks.
8 Prosper Canada | Income tax filing and benefits take-up 2019Introduction
Methodology
This report relies on First, the researchers developed and Second, using the survey data as a foundation, Finally, the research was supported by a scan
three main sources of pilot-tested a short survey (Appendix 1) of the researchers developed a semi-structured of relevant newspaper articles. The initial scan
information. open-ended, qualitative questions aimed at key informant interview guide (Appendix 2). took place between January and May 2017 using
community service providers that work with The guide was aimed at people experienced in Google News. The search relied on key words
Canadians with low incomes – especially supporting income tax filing for Canadians living related to Canadians with low incomes (for
professionals working directly in the area of tax on low incomes or engaged in other financial instance, search terms included “low-income”,
filing. The survey was open between August literacy or advocacy efforts. In all, 10 key “low income”, “poverty” “poor”) and tax filing
11th and August 29th, 2016 and shared with informants from across Canada, and one from (for instance, search terms included “CRA”
approximately 4,396 people via the Prosper the United States, were interviewed. The key “Canada Revenue Agency” “benefits” “tax filing”
Canada email newsletter and Prosper Canada’s informants were identified through the literature “income tax” as well as the names of specific
social media accounts. The survey was re- on tax filing, consultation with tax-filing experts benefits). The preliminary search was focussed
shared by several community organizations. A at Prosper Canada, and recommended by key on Canada, but several articles addressing
total of 321 people began the survey, though informants. Interviews took place over the the situation in the United States were also
not all respondents completed all questions. In phone or in person and notes were recorded by captured. Multiple newspaper searches were
total, 230 surveys were partially completed; the the researcher. Interviews were open-coded and conducted to look at income tax filing and four
results presented here include all responses analyzed in Excel. groups emerged as requiring particular focus:
received. The qualitative data were inputted into Indigenous Peoples, people with disabilities,
Excel and the research team jointly developed newcomers (including refugees), and self-
and pilot-tested a codebook for qualitative employed Canadians living on low income.
analysis. Two researchers analyzed the results
for each question in Excel and discrepancies
were resolved via consensus. Limitations
This study did not survey or interview
Canadians living on low incomes for their
perspectives. The majority of respondents
to the survey were located in Ontario, which
means the study may not represent a truly
national picture of tax filing.
9 Prosper Canada | Income tax filing and benefits take-up 2019What are
the barriers?
In considering the potential Community service providers who work with vulnerable
Canadians with low incomes were asked to identify what
benefits of tax filing, it is they think are the three most significant barriers to income
essential to understand why tax filing for Canadians with low incomes (Appendix 1). These
some Canadians are not filing. open-ended responses give a comprehensive picture of the
challenges their clients face when it comes to accessing
income boosting benefits through the tax system (Figure 1).
10 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Not understanding what to do
The most frequently cited literacy was a fundamental corroborated this, “Forms “I still have a problem filling these [tax forms]
barrier to accessing benefits barrier. People lack are confusing: tax laws and out electronically and have almost missed
was lack of necessary “knowledge about taxes, reporting forms are confusing
knowledge and skills to tax finances, and government.” for the average person, the
a large refund due to not understanding the
file and complete benefits ’explanations’ provided are software and who should claim the taxes. I
The tax system is very
applications. This is a
complex and challenging for
convoluted which further have a Master’s degree!”
fundamental issue – one intimidates clients and most
all Canadians to navigate.
underlying broader financial give up and just don’t file.”
According to a Fraser Institute
challenges for people with low Complex tax forms and the
report, from 1990 to 2014 the
incomes. Survey respondents perceived opportunity cost of
size of the federal income tax
wrote that people “don’t tax filing (time spent on an
form increased by 25 per cent,
understand how to,” “don’t onerous task with potentially
the text area by 62 per cent
know how to file,” and “do not little reward, versus something
and the number of credits,
know how to do it,” and lacked else) is a crucial barrier.16 One
deductions, exemptions, and
the “ability/know how to respondent admitted,
exclusions by 22 per cent.15
complete.” Many thought
Survey respondents
that overall low financial
11 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Figure 1
Barriers to tax filing for people living on low incomes
According to 321 community service providers
Not knowing Challenges Problems
what to do accessing assembling
210 existing documents
supports 91
95
Fear, mistrust Other Literacy, numeracy
and lack of (including and language skills
confidence complex tax
61
Not knowing High cost of 76
and personal
situations)
where to get help private tax help 65
101 98
Tax filing is low
priority 28
Mental health and cognitive barriers 16 16
Precarious housing 15 15
Isolation 14 14
12 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Many Canadians with low incomes are not aware Not knowing where to get tax help
of key tax credits and benefits, are not sure if they For Canadians with low incomes, not knowing where to get help with tax filing is a barrier. Many
are eligible, or may not know they need to tax file people do not know they can access free income tax clinics and other help in their communities.
in order to access benefits. Challenges include “lack of knowledge - where to get help, computers, no cost options” and “finding
an accessible, free income tax preparation provider.” Surveyed experts pointed out that the CRA is
While few survey respondents saw eligibility awareness as a not a consistent source of tax help. The “CRA [is] getting out of the business of helping taxpayers” and
barrier (20 out of 321 survey respondents), it is one of the most people “can’t get hold of Canada Revenue to ask questions.” This gap in knowledge also applies to
commonly cited challenges in the literature on tax filing and people working with vulnerable groups. Forty-three out of 321 (13 per cent) survey respondents could
benefits take-up.17, 18, 19 Respondents said that the “perception not name a program or organization doing an “exemplary job” of supporting tax filing.
[that] having a low income means not having to file” is a major
issue, as is “not knowing they should be filing regardless of
income.” Respondents also thought that Canadians on low High cost of commercial tax help
incomes “don’t understand the benefits” or know that “… they Ninety-eight (31 per cent) respondents pointed out that people needed filing help, but could not
must file to get various credits.” “Canadians are not aware of afford professional tax filing help – e.g. “accessing reliable, affordable/free support, especially for
incentive to file (i.e. tax credits).” Awareness may also relate people who need to file multiple years,” “access to accountants for support,” and “lack of funds
to the design of benefits and their complexity, since it may be to pay for an agency to file their income tax.” Many mentioned that commercial tax preparation
difficult for people to assess their eligibility and programs may services offer free basic online filing to individuals with low incomes, but also pointed out that
not be well-promoted. even Canadians with low incomes may have complex tax situations that disqualify them from these
services. According to survey respondents, Canadians with low incomes sometimes use commercial
tax services like H & R Block, even though they are eligible for free programs.
“Many mentioned that commercial tax preparation services offer free
basic online filing to individuals with low incomes, but also pointed
out that even Canadians with low incomes may have complex tax
situations that disqualify them from these services.”
13 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Challenges accessing existing supports
Many Canadians are unable to use existing tax and “transportation to sites.” Respondents also the internet.”21 CRA launched a secure mobile
clinics and online supports. Free community suggested that caregiving challenges make it app called MyCRA in 2015 that allows users to
tax clinics supported by trained volunteers exist difficult for people to access clinics. review and update their tax information. CRA
in many communities. These may be offered has also approved a number of mobile app
There are few programs “to support people
through CRA’s Community Volunteer Income versions of commercial tax return software
who need more intensive help than what’s
Tax Program (CVITP) or through programs like (TurboTax and SimpleTax). Commercial tax
available at the free clinics. For example, help
the Chartered Professional Accountants (CPA) software providers have commented on
obtaining slips for past years or dealing with
of Ontario program. Clinics supported by CVITP the sharp increase in mobile filing in recent
a post assessment review or changing status
have restrictions on who they can serve (e.g. years, particularly among people in their
when relationships breakdown.” Canadians
no self-employed). These restrictions may or 20s.22, 23 Nevertheless, there may be gaps in
may have complex situations that tax clinics are
may not apply to non-CVITP clinics. According effectiveness and promotion of tax return apps
not equipped or permitted to handle. People
to respondents, “volunteer clinics can’t meet for young people.
“don’t fit within CVITP guidelines (e.g. self-
the demand for free help.” There are too
employed, filing for a deceased person)”20 and
few clinics, particularly in rural and remote
“Self-employment income means no help with There are few programs “to support people
areas (see “Geographic and other forms of
isolation”). Tax clinics may not have adequate
your taxes.” Another challenge is that the cut-off who need more intensive help than what’s
for eligibility is low. Households earning more
capacity to deal with more complicated tax available at the free clinics. For example, help
than $40,000 may be financially vulnerable and
situations – like taxes for newcomers and
unable to pay for private tax help. obtaining slips for past years or dealing with
people with disabilities. Respondents pointed
out the challenge of getting tax help outside Canadians without computer access may not
a post assessment review or changing status
of tax season. People do not know “where to be able to take advantage of free online tax when relationships breakdown.”
get their taxes done for free out of tax season return software made available by commercial
time (free tax clinics are only available during providers to filers with incomes below a certain
April/March).” Similarly, it is hard for people to threshold amount. According to another survey
access clinics with limited hours and to arrange respondent “Government of Canada websites
transportation. There is a need for “tax-filing [are] rarely cell phone compatible or simple to
sites that have flexible schedules (i.e. drop in use on these platforms, which is the primary
available to deal with scheduling challenges)" way youth and low-income people access
14 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Problems assembling documents
Eighty (25 per cent) respondents identified particular challenges acquiring SIN numbers Newcomers may also have problems
disorganization and difficulty assembling and birth certificates for their children.24
locating documents from their country
documents as key barriers to tax filing. This Newcomers may also have problems locating
challenge is linked to other barriers like documents from their country of origin, may of origin, may not understand which
precarious housing (not having a safe place to not understand which documents are required, documents are required, and require
keep important documents), lack of motivation, and require help translating documents. Maria help translating documents.
low literacy, and lack of knowledge about Sophianopoulos from WoodGreen Community
what is required to file taxes and why certain Services describes the challenge of getting rent
documents are important to keep. Challenges relief “People who get caught are the ones who
included “no identification,” problems are most vulnerable – the ones renting an illegal
“obtaining and saving the documents needed room. The landlord won’t give a receipt. People
to file,” “if they’ve worked [they] don’t have are young, part of the same ethnic community
their T4s,” the “complexity of the form, and as the people who own the place, and it’s a
required receipts/info not easily accessible/ way to deal with housing shortage in Toronto.”
available,” and “many of our clients do not This connects to broader challenges around
have [a] SIN.” assembling “documentation to get credit – [for]
example, their metro passes, their medical bills,
According to Shillington, uptake of the
rent receipts.” According to Stephanie Nakitsas,
Canada Learning Bond (CLB) is hampered by
co-founder of Urban Workers, assembling
bureaucratic processes and costs. The CLB is
documents is difficult for self-employed people
a grant paid by the government to children
who may have three to seven contracts in a year.
in families with low incomes to help save for
higher education. Newcomers to Canada face
15 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Fear, mistrust and lack of confidence
Fear, mistrust of the government, and lack people. A recent NerdWallet survey found that Media and critical attention around taxes,
of confidence were identified as barriers 80 per cent of millennials are afraid of making understandably, focus on how much Canadian
by virtually all experts interviewed. Survey a mistake on their taxes.27 Overall, personal households pay in taxes each year. A Fraser
respondents were less likely to mention fear resources, knowledge, and skills are essential Institute study estimated that the average tax
as a barrier, but identified clients’ “feeling of to giving people the confidence to navigate bill for Canadians was $10,616 in 2015 and that,
intimidation,” “fear of declaring their source the system. between 1961 and 2015, taxes increased by 1,939
of income,” “fear of government,” “mistrust per cent.28 While debates around all aspects of
There is also a broader negative cultural
of the government and fear they will ’owe’ if taxation are extremely important, the perception
perception of taxes. According to a respondent,
years are outstanding,” “fear of owing taxes,” that the government will claw back money from
“there is a fear, either expressed or implicit,
“fear of process,” “fear of having to pay, “lack Canadians with low incomes is a barrier to filing.
with many clients. Although there is help
of knowledge and fear regarding Canada’s Bad tax advice and scams associated with taxes
readily available, they are often intimidated
tax system (new immigrants),“ “shame, fear,” compound this situation.29 A recent tax scam,
by the system – as they perceive it – not
and “isolation and feelings of embarrassment, first identified in 2013, is a good example of
as it actually is.” Lucas Stone, Financial
humiliation, etc. about their financial situation.” how fraudsters prey on the cultural fear around
Empowerment Coordinator at Make Tax Time
tax filing. In the scam, someone claiming to be
Closely related to fear, is lack of confidence Pay in Edmonton shared that “for the vast
a CRA employee calls and tells the potential
in one’s ability to navigate the tax system. majority of people under a moderate income,
victim about their failure to file or an error in their
“Confidence – many people think preparing you do your taxes and get money back, but the
tax return and asks for financial and banking
a tax return is complicated and requires cultural language that the ’tax man is going to
information to settle the debt to the government.
math skills.” They are also worried they will take your money’ is so pervasive that we have
Newcomers and seniors have proven particularly
make a mistake and be penalized for it.25,26 people who have made no income but are
vulnerable to this scam.30,31 The government and
Sophianopoulos describes it as a need for scared and nervous they’ll have to pay some
media attention often focuses on fraud, while
“moral support” and that “[a] lot of older lump sum to the government.” As Andrew
failing to highlight the consequence of low take-
people will say ’I like having you do this’ ’I’m Cash, co-founder of Urban Workers, put it
up of benefits.32
much happier having someone else doing it.’” “we’ve had about 40 years of propaganda
This lack of confidence also affects younger about taxes being bad.”
16 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Literacy, numeracy and language skills Tax filing is low priority
People with limited or no English or French Respondents and interviewees work closely with Canadians living on low incomes and, as a result,
language skills struggle to understand were very conscious of the complexity and daily challenges of their lives. Seventeen respondents
and comply with income tax forms. Survey pointed out that with all of the daily problems of a household – childcare, work, finding work,
respondents identified “low literacy/numeracy/ caring for dependents etc., tax filing is simply a low priority for some people. “Clients have difficulty
digital skills,” “literacy issues,” “reading,” and attending scheduled appointments” and are “unable to file personal documents year to year.” Other
the “technical language used by CRA” as barriers. barriers are “disengagement” and “Time to attend the appointment, as many instances they are
This is also a challenge for newcomers who may overwhelmed with other life challenges.” This is particularly the case when tax filing itself is difficult.
not have access to tax information in their first A 2016 CBC profile on income tax filing illustrates the challenge of competing priorities. Janet Smith
language. Computer literacy is also a typical had three years of back taxes to catch up on and was struggling to assemble her documents. Three
barrier. In 2016, 16 per cent of Canadians who years ago, a parent died, she had back surgery, and had a business failure. Taxes were low priority.
filed used paper forms – a 66 per cent drop from For Smith "Enough was enough. I just had to put it off."35
2006 – but certain demographic groups may be
overrepresented in paper filing.33 Respondents
mentioned that the shift from paper to online Mental health and cognitive barriers
filing has been a major challenge for seniors and Sixteen (five per cent) respondents identified barriers related to mental health, declining abilities
others who do not have computers or have low due to aging, and general cognitive challenges like learning disabilities. For instance, barriers
computer literacy.34 were “cognitive/mental health, which impacts on the executive functions required to organize
and file necessary paperwork and receipts for income tax purposes, as well as an inability to
navigate the tax filing documents/system,” “disabilities – learning barriers i.e. memory issues
FSD, Autism, developmentally delayed, lack of writing and math skills, ” “lack of capacity due to
aging,” and the need for a “support person to organize and prioritize tax filing for the individual.”
Issues around knowledge, complexity, and eligibility awareness are especially challenging for
people with mental health challenges. In Canada, mental health is a particular problem since
there is confusion among physicians, potential recipients, and tax filing professionals as to
whether mental health conditions qualify those affected for disability benefits. They are indeed
eligible, but this confusion further compounds the stigma and barriers associated with mental
health problems and their impact on people’s lives.36
17 Prosper Canada | Income tax filing and benefits take-up 2019What are the barriers?
Precarious housing Geographic and other forms of isolation
For people without fixed addresses – Canadians in rural areas, or who lack access women from cultures where their movement
precariously housed Canadians and frequent to transportation, can have challenges may be restricted) may not be able to access
movers – it can be a challenge to learn about getting to banks, government offices, and tax help or may be less likely to learn about
benefit opportunities, assemble and maintain tax preparation services (free tax clinics benefits and tax-filing information. Isolation
documents, prioritize tax filing, and receive or commercial services). Barriers include is also relevant because social networks are
benefits.37 According to survey respondents, “isolation in rural locations – no transportation an important way for people to learn about
“no address,” “transient lifestyle,” and “no or phone,” “finding a free location nearby,” benefits. People with less developed networks
permanent/fixed address” were all barriers. and not being able to “travel to fill out forms may miss out on information about helpful
Evidence for people who are precariously housed at times.” Those with disabilities and anyone programs.39
or frequent movers shows that they feel less with limited mobility (including seniors or
connected to communities, i.e. social networks,
which are a key source of information on benefits,
have lower awareness of available services,
"Those with disabilities and anyone with limited mobility (including
encounter more challenges accessing services seniors or women from cultures where their movement may be
(due to their location in different neighbourhoods restricted) may not be able to access tax help or may be less likely
and settings and not knowing where to go for
to learn about benefits and tax-filing information."
help), and feel less trust towards health services,
the police, and other government agencies. This
is also challenging for service providers, because
it is difficult to offer continuity of services – e.g.
following up on a tax return.38 This issue is closely
connected to lack of paperwork. Respondents
identified challenges like “homelessness (not
having identification, documents, etc.),” “rapid
address changes/couch surfing - loss of ID,” “loss
of paperwork – moving and losing government
tax documents,” and “No records: precarious
living - move often, evicted often, couch surfing,
no documents, permanent address changes
regularly - gets them in trouble.”
18 Prosper Canada | Income tax filing and benefits take-up 2019Who is
most affected?
Through the survey, the literature on tax filing and a scan The particular tax-filing context for First Nations people in Canada
of newspaper articles, we identified four groups with unique
tax situations:
demonstrates the need for better understanding of First Nations’ taxation
among volunteer and commercial tax services and for targeted tax-filing and
1. Indigenous Peoples
financial literacy interventions.
2. People with disabilities
3. Newcomers
4.
Self-employed individuals with low incomes
These groups also demonstrate the very complex situations
that people with low incomes can face when tax filing and how
these challenges intersect.
19 Prosper Canada | Income tax filing and benefits take-up 2019Who is most affected?
Profile 1
Indigenous Peoples
Indigenous people with These include language, the values that Survey respondents and interviewees information on tax filing tends to focus on
low incomes have some shape financial choices, lack of trust also highlighted Indigenous Peoples’ tax obligations and exemptions rather than
of the same income tax towards governments and financial historically fraught relationship with possible benefits and credits.47, 48 Simon
challenges as other filers, institutions, geographic isolation, Canadian governments. In response to this Brascoupé, Vice President of Education
but they encounter additional cultural limited access to banks and other barrier, survey respondents emphasized and Training at AFOA Canada, suggests
and structural barriers. financial services, education, literacy, the need to build trust, for instance, to that existing programs – perhaps
and numeracy gaps.40 The particular tax- “reach First Nations communities. It may connected to health services or to trusted
filing context for First Nations people in be best to connect with local First Nations groups like AFOA Canada – should take on
Canada demonstrates the need for better led organizations and/or Band offices to tax filing and benefits promotion through
understanding of First Nations’ taxation see what they would need/want. We see information packages, reports, and tax
among volunteer and commercial tax a really high demand among First Nations clinics. He sees the Canada Child Benefit
services and for targeted tax-filing and individuals.” Patsy Schramm, Consultant (CCB) as a wake-up call that Indigenous
financial literacy interventions. with the First Nations Development people are missing out on income-
Institute in the United States, emphasized boosting benefits. In promoting tax filing,
A major source of misunderstanding is
that being Cherokee was essential to young people may be a specific group
the popular perception that First Nations
legitimizing her work for the Native VITA to target because, as Saulis points out,
people do not pay taxes. The reality
program. For Schramm “Native people seniors on reserves have higher filing and
is that exemptions are very narrowly
trust Native people. If you can convince take-up rates. Brascoupé agrees, saying
defined and do not affect benefits
the leaders to get on board, and they’re much of the tax filing support in First
eligibility.41, 42, 43, 44, 45 Tamara (Tammy)
the ones who share the information, it’s Nations communities is directed to elders
Saulis, Chief Financial Officer of Nipissing
going to be better received.” accessing pension benefits.49,50
First Nation and AFOA Canada (formerly
Aboriginal Financial Officers Association of Many community groups do run programs
Canada), said that she frequently helps on reserves and in community centres.46
people with returns who have been Saulis and her team at AFOA had helped
misinformed by private tax preparers approximately 60 people to file by
or volunteer clinics. “H&R Block is not September 2016. She also personally does
equipped for First Nations tax filing. 20 returns each year for family members.
There are also bookkeepers who’ll While more informational brochures are
argue with the individual saying ’you’re appearing for other income-tested benefits
supposed to be paying income tax.’” like the Registered Education Savings Plan,
20 Prosper Canada | Income tax filing and benefits take-up 2019Who is most affected?
Figure 2
Groups considered by respondents to be most
affected by barriers
People living on low incomes 132
Newcomers 96
Seniors 82
Families, including single parents 76
People with addictions and
mental health challenges 74
Precariously housed 60
Young people 57
People with less formal education 33
People with disabilities or caregivers 31
Indigenous people 24
Other 56
Number of respondents (n=321)
“Richard Shillington, a social policy researcher, estimates that between
five and 10 per cent of families living on low incomes are not getting
the benefits to which they are entitled.”
21 Prosper Canada | Income tax filing and benefits take-up 2019Who is most affected?
Figure 3
Frequently-cited
barriers by group
Lack of Not Cost of Difficulty Difficulty Fear/ Low Tax filing Mental Precarious Isolation
knowledge knowing private accessing assembling lack of literacy is low health and housing
where to help tax clinics documents confidence priority cognitive
get help barriers
People living on low income
(including benefit recipients)
Newcomers
Seniors
Families with children
People with addictions and
mental health challenges
Precariously housed
Young people
People with low levels of
formal education
People with a disability/
illness and caregivers
Indigenous Peoples
22 Prosper Canada | Income tax filing and benefits take-up 2019Who is most affected?
Profile 2
People with
disabilities or As challenging as tax filing is for people with immediate, daily challenges to see challenging to fill out in cases of mental
caring for those with low incomes, the situation is made the benefit. The problem of qualifying health and cognitive disabilities, which
with disabilities
worse with the additional barriers and for, and accessing, benefits and credits make up approximately 30 per cent of
struggles associated with disabilities. For is particularly acute for people without short and long-term disability claims in
people with disabilities and their caregivers family support, who may fall behind in the workplace.53 Overall, physicians have
One survey respondent “researching and applying for tax credits filing their taxes, lack a fixed address, significant discretion in determining
shared “I have met with takes a back seat to other needs.” and lose documents. whether or not someone has a disability.54
single parents with Some doctors may charge a fee to
One difficulty is that the benefits system According to O'Dwyer, qualifying for the
multiple children with fill out the eligibility form, which is
for people with disabilities has different Disability Tax Credit (DTC), the gateway
disabilities that have not accessed another potential barrier for people with
qualification criteria at the provincial and to the RDSP, can be very difficult, as
the Disability Tax Credit or our disabilities living on low incomes.55
federal levels and between agencies. physicians may not know how to fill out
provincial primary caregiver credit
According to Tom O'Dwyer, an accountant disability forms in a way that makes Another challenge is that people with
and their children have lived with
at Ability Tax who specializes in disability sense to the CRA. Rules on eligible disabilities, especially those who are
these disabilities for years.”
benefits, “they’ve made it extremely conditions are constantly changing and not tied to community groups or patient
complex for people trying to help these the understanding of disability from a networks (e.g. the Multiple Sclerosis
individuals.” He says that though the medical perspective may be different Society), may be socially isolated and
Registered Disability Savings Plan (RDSP) than the concepts underpinning CRA not know about benefit opportunities
is a great program, it is future oriented, requirements.51, 52 O'Dwyer points out and processes.
which makes it difficult for people dealing that disability forms are particularly
“The problem of qualifying for, and accessing, benefits and credits is particularly acute
for people without family support, who may fall behind in filing their taxes, lack a fixed
address, and lose documents.”
23 Prosper Canada | Income tax filing and benefits take-up 2019Who is most affected?
Profile 3
Newcomers
In an article to assist This seems to be a typical experience. a more laid back country (maybe also a challenges. A respondent shared that
newcomers filing taxes, According to Dhirta Subedi, a settlement dictatorship)?” MacDonald also described “I have met with a mother that was a
Gokul Jayapal describes his counsellor at Welcome Place, "many the problem of finding and verifying refugee who had been paying for her
experience filing taxes for refugee families, due to lack of documents from other countries – “I had son’s hearing aid batteries for years
the first time in Canada, "I went to knowledge or language, don’t have a a family last year … and we had to keep because Income Assistance did not take
a bank hoping they can file income clear understanding of the importance delaying their tax appointment for two the time to bring in a translator to explain
taxes for me, but they politely of filing an income tax return.”57 For and half months, so they could track . . . benefits for her son with a profound
explained to me to get help from a Julie MacDonald, Program Coordinator down the paper work for their [country of hearing loss.” Respondents advocated
tax professional. I faced a fair share at the YMCA Halifax, “there’s just a origin] pension as well as their income for multilingual, culturally sensitive
general, huge lack of awareness around from working in [country of origin] for that interventions and pointed out that
of newcomer obstacles in my early
government benefits that newcomer particular tax year. It was a huge source newcomers are sometimes independent
days in Canada."56
families may be eligible for.” She said of stress for them trying to find English and only use services for their first few
“we’re working with a family that’s been versions of their foreign documents or years. According to Stone at Make Tax
in Canada since 2009 and just recently even finding those documents.” One Time Pay, “our experience is that they
found out that they need to do taxes. survey respondent also said that “Some were very eager to try to figure it out and
They’re now struggling to find papers immigrants end up working for cash. tended to be very prepared. They may
from 2009 to get their refunds and They do not have good knowledge of need only minimal help in future years”.
benefits, because they had no idea they social benefits associated with taxes
were supposed to be doing it.” such as EI [Employment Insurance] and “It was a huge source of stress
Newcomers show “unfamiliarity
pension plans.” for them trying to find English
[with] Canadian tax documents” and Newcomers and immigrant seniors are versions of their foreign
the Canadian income tax system. particularly vulnerable to misinformation
Sophianopoulos says that the biggest and fraud.58 Like Indigenous people,
documents or even finding
challenge for newcomers is that many newcomers also face certain social those documents.”
don’t speak English, but that it also stigma around their access to benefits
“all depends on which country they – and may be inaccurately perceived as
come from. Are they from a totalitarian burdens on the system.59 For all tax filers,
regime in which any interaction with the the situation becomes even more difficult
government will send you to jail? Or from when they are dealing with additional
24 Prosper Canada | Income tax filing and benefits take-up 2019Who is most affected?
Profile 4
Self-employed Community Response and Advocacy at
West Neighbourhood House, they are
capacity to help. For Sophianopoulos,
“I feel badly telling someone who has
One exception is ACORN Canada, which
recently launched Tax Collective, a social
individuals with noticing “many low-income people are
being encouraged by social assistance to
made $30,000 that ’yes, you can write off
your expenses, but you owe HST on every
enterprise operating on a cost-recovery
model to help people who might not
low incomes start up their own businesses.” Miryam one of those services.’” For Stone at Make qualify for other free programs.
Zeballos has observed the same trend, Tax Time Pay, “the frustrating thing is that Nevertheless, programs for freelancers
For self-employed people “there are a lot of people in the Ontario we’ll get people who aren’t aware that are not being developed with the
in Canada, tax filing is not Works program for the self-employed they are self-employed and think they’re
self-employed tax filer in mind and
strictly about boosting and they are not making much.” Recent employed.” Sophianopoulos says, “for
are, instead, to prevent tax evasion.
income through benefits take-up, as controversies with Uber and Airbnb show someone like an Uber driver especially, Stephanie Nakitsas and Andrew Cash, the
they may not receive a refund and that many Canadians earning money in the very few are making enough money to founders of Urban Workers, suggest that
may even owe money. sharing economy are not reporting their afford to hire an accountant. You can now their community of younger, precarious,
incomes or paying GST/HST.69, 70, 71, 72 Many claim some of your car repairs. We can’t contract workers would benefit from
Tax filing is also about boosting their financial do not realize they are required to pay tax tell you the percentage you can claim. initiatives like raising the GST/HST
security, avoiding the consequences of tax on ’gig economy’ incomes.73 This kind of You have to figure out which percentage threshold, income averaging (for
evasion, and investing in future benefits (e.g. misunderstanding shows that freelancers of the car you use for work. They have instance, by pre-paying tax or withholding
CPP retirement and Employment Insurance have important knowledge gaps when it to keep every single gas receipt and part of annual income for a future year),
Special Benefits for the self-employed). comes to tax filing and this is not unique have a corresponding log. You have tool kits and fact sheets on how to file
However, key informants from Urban Workers to the sharing economy.74, 75, 76 to pay HST on every single sale. If you taxes and where to go for help, and more
also shared that tax filing for freelancers can be haven’t done that, this tax return will get
Julie Macdonald has encountered growing government efforts to understand and
an enormous source of stress and uncertainty. you audited.”77 Paperwork is a typical
demand from small business owners address the financial challenges of self-
The rules are complex and the risk of audits challenge. For instance, some employers
for help, which the YMCA Halifax’s free employed, precarious workers. As one
and penalties for filing mistakes are very high.60 may be slow to get contract workers
income tax clinic is unable to provide. interviewee said about self-employed tax
The explosion in the sharing economy has their paperwork.78, 79, 80, 81, 82
The YMCA tries to connect people filing, “no one is looking into this area.”
increased the number of self-employed with resources, but it is challenging. Few programs exist to help self-employed
Canadians.61, 62, 63, 64, 65, 66 Some of these newly Sophianopoulos suggests that, for people with low incomes file their taxes
self-employed are already financially vulnerable relatively straightforward situations – e.g. (CRA’s CVITP clinics are prohibited from
– like young people and newcomers. More someone cleaning houses and making providing filing assistance to individuals
social programs are also encouraging people $10,000 a year – some clinics may be able with employment expenses, business
with low incomes to become entrepreneurs.67, 68 to help. In other cases – e.g. an E-Bay or rental income/expenses, or who are
According to Lynne Woolcott, Director of seller who would like to make business self-employed). Tax-filing assistance
deductions, free clinics do not have the from a professional accountant is costly.
25 Prosper Canada | Income tax filing and benefits take-up 2019Opportunities to
increase benefit
take-up through
income tax filing
The survey results and Efforts include supports delivered in a wide range of settings Existing tax-filing supports, many part of the CRA’s CVITP
– e.g. food banks, retirement homes, subsidized housing, clinics, are doing outstanding work to overcome barriers for
interviews show the breadth community centres, and libraries (Figure 4). Respondents Canadians with low incomes. For instance, the Make Tax Time
and richness of organizations involved with these kinds of programs acknowledged the Pay program in Edmonton run by E4C and funded by United
working to support tax filing. resources and training from CVITPs. One respondent, for Way, provides free tax preparation services through over 20
example, praised the CVITP, describing its excellent support tax clinics with 250 volunteers and files over 4,000 tax returns
Many survey respondents were
for tax preparers, online training, and special help line. Other each year. Between January and September 2016, WoodGreen
knowledgeable about local programs facilitated by accountants and students were also Community Services in Toronto completed 5,001 returns worth
efforts to help Canadians with mentioned. Only six respondents identified companies that offer $1.48 million. Nevertheless, the interview and survey data
low incomes file their taxes. free online filing for people under a certain income threshold. suggest opportunities to strengthen supports and learn from
successful tax-filing interventions.
26 Prosper Canada | Income tax filing and benefits take-up 2019Opportunities to increase benefit take-up through income tax filing
Figure 4
Who is doing an exemplary job of supporting tax filing?
(according to 321 survey respondents)
Non-profit organizations 95
CVITP 59
Don’t know 43
Volunteer income tax clinics 40
Government agencies and offices 10
No one is doing a good job 7
Chartered accountants (e.g. CPA Ontario) 7
Private sector 6
University students 5
Existing tax-filing supports, many part of the CRA’s CVITP clinics, are doing outstanding work to
overcome barriers for Canadians with low incomes. For instance, the Make Tax Time Pay program
in Edmonton run by E4C and funded by United Way, provides free tax preparation services
through over 20 tax clinics with 250 volunteers and files over 4,000 tax returns each year.
27 Prosper Canada | Income tax filing and benefits take-up 2019Opportunities to increase benefit take-up through income tax filing
Simplifying tax filing
Simplification and automation are proven ways to For self-employed people living on a low income, The new CRA Auto-Fill program introduced in 2016, is
improve access to benefits. In the United Kingdom, the the CRA reviewed its services to small and medium a step towards making tax filing less burdensome. It
Office of Tax Simplification advises the government on enterprises, which may simplify and clarify tax filing.88 allows individuals, or their authorized representatives,
simplifying the tax system, including the language and Survey respondents requested very basic supports to securely and automatically fill in parts of their income
content of forms, and reducing paperwork. Canada has such as simplifying the language of forms, providing tax and benefit return with information that the CRA has
no equivalent office.83 plain language one-page summaries explaining tax available at the time of filing the return. The program is
filing and benefits, and easier processes for replacing meant to reduce errors and make filing less burdensome for
High uptake rates are associated with programs that:
missing tax documents. Sophianopoulos suggests Canadians. The information provided through this service
• Are universal that plain language tax information is important and is fairly extensive and includes tax slips for employment,
• Are automatic or have no application process that the CRA “design the website for regular tax filers benefits like pensions and the CCB, and connects the form
rather than tax professionals.” For Zeballos, the tax with related information like immigration arrival dates.
• Have no associated application costs
system is “continuously changing” and it is hard for Nevertheless, it is only available for the tax years 2015 and
• Have very simple and clear eligibility criteria even professionals to keep up. Many of these suggested beyond, Canadians must be registered for “My Account,”
• equire information about the claimant only (e.g.
R initiatives (e.g., plain language, pre-filled forms) currently which requires computer access and literacy, it must be
when parents are estranged, but one needs to apply are being incorporated into tax filing by the CRA. completed through an online application (which may or
for child benefits) may not be free), and many people are still unaware that
the program exists and do not know how it works.91 For
• Proactively reach out to eligible people84 Automatic filing instance, many survey respondents did not know about the
For instance, commentators suggest that the simple Several respondents advocated for automatic filing for program and several pointed out the need for more training
change of establishing a RDSP automatically once an certain groups – e.g. people with simple returns and and awareness around it. It is too early to evaluate the
individual is eligible for the federal DTC would make the benefits recipients, and even for the entire population. An effectiveness of the program, but, in spite of these barriers,
process less onerous for eligible individuals and their example of a more automatic process is Ontario’s 4-in-1 it seems like a positive step.
caregivers.85 As a respondent put it, “the more hoops a Newborn Bundle that allows parents to register a child’s
person has to jump through to file their taxes, the less birth, get a birth certificate, apply for a Social Insurance
likely it is that they will file.” Number, and sign up for the CCB.89 The Organisation
Many different commentators have identified problems for Economic Co-operation and Development (OECD)
with the complex language and length of Canadian suggests pre-populated returns reduce fear and uncertainty
income tax forms.86 The code was 11 pages when it around filing, speed processing, reduce errors, and have a
was created in 1917 and 3,200 pages by March 2014.87 reduced compliance burden for tax payers.90
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