Filing taxes brings major benefits to people on low incomes
As tax time approaches, many of us may feel like shrinking from the task of tax filing, especially with the prospect that we may end up owing, rather than pocketing, money at the end of the process.
For people in Canada living on low incomes however, tax time is an important opportunity to tap into a wide array of federal and provincial tax benefits that can give a real boost to their incomes. Tax filing can also help them qualify for other income-tested benefits delivered outside of the tax system.
People on low incomes are losing out on more than a billion dollars of benefits
Many people on low incomes are missing out on their benefits because they don’t file their taxes. Others do file, but aren’t able to take advantage of the different benefits available to them because they aren’t aware they’re eligible or don’t know how to navigate the process to apply. Some of these benefits, such as the Canada Child Benefit, Old Age Security, the Working Income Tax Benefit and GST/HST credit can cumulatively add up to thousands of dollars of additional income for families struggling to make ends meet.
The Guaranteed Income Supplement (GIS) is another good example of a major benefit program accessed through tax filing that is not reaching all of its intended beneficiaries. The GIS provides a monthly non-taxable benefit of up to $864 to Old Age Security recipients who have a low income and live in Canada.
Canada’s GIS take-up rate is estimated to be 87 per cent (based on a 2010 evaluation). This is exemplary by international standards and means about 1.6 million seniors receive the benefit. However, more than 200,000 potentially eligible seniors still miss out on this much needed income. About a quarter of these are people who do not file taxes. (HRSDC, Evaluation of the Guaranteed Income Supplement Take-up Measures and Outreach – Final Report, 2010).
Low awareness and other barriers prevent many people with low incomes from tax filing
Some people see no reason to file, even though they stand to benefit a great deal if they do. Many people with low incomes don’t file because they don’t owe income tax and are not aware of tax credits and benefit programs that might boost their incomes. Some people are worried that tax filing might make it easier for debt collectors to find them. Others encounter language, literacy, numeracy and computer literacy challenges when it comes to tax filing.
People may also have difficulty assembling the necessary documentation to qualify for benefits. While electronic filing is easier for many people, the fact that CRA no longer mails income tax forms to people or provides its Telefile service makes tax filing harder for some seniors, people with disabilities, people living in rural areas, and people who don’t have easy access to high-speed internet or a computer. People with low incomes experiencing challenges or who have complex tax situations may need hands-on help to tax file, but can’t afford paid tax advisors and may not know where to turn for free help if it’s available in their community.
Innovative approaches to helping people tax file are making a big difference
As governments increasingly turn to the tax system to deliver important income benefits, innovative approaches to helping people with low incomes to tax file are making a huge difference in communities – unlocking latent resources and putting them in the hands of those who need them most.
Community tax clinics are one of the most effective ways to do this. Tax clinics mobilize and train volunteers to help people with low incomes boost their incomes through tax filing.
Increasingly, community, government and private sector organizations that actively support tax filing are developing innovative approaches to expand their reach and impact. Some are teaching interested clients how to file their own taxes and those of family members, or developing ways to deal with more complex cases (for example, people who are self-employed or with multiple years of back taxes).
Others are experimenting with mobile clinics and telephone support to help those with mobility challenges who can’t get to a clinic. Still others are delivering broader financial advocacy and supports, in addition to tax filing.
Exploring avenues to scale up effective supports and their impact
Innovative programs like these and the examples below are making a critical difference. But many people with low incomes still struggle to find help when they need it – online or in their community.
Prosper Canada is working with partners in all sectors to explore innovative approaches that will enable more people to get the tax filing help they need and more communities to benefit from the resulting flow of new resources and capability. Successful scaling requires not just innovation, but ensuring communities and organizations have the tools, resources, and know-how they need to deliver sustainable programs that meet the needs of their diverse residents and clients.
Examples of high-impact initiatives
Community Volunteer Income Tax Program (CVITP): This Canada Revenue Agency program provides training and supports for community-based organizations and their volunteers that offer free tax filing services for people with low incomes and provides information on where to find free tax clinics across Canada.
Financial Empowerment and Problem Solving (FEPS) Program: Begun by West Neighbourhood House in Toronto and expanded to five sites across Ontario in 2015, this program offers free financial help to Ontarians living on low incomes. FEPS assists participants with tax filing, debt, saving, budgeting, opening bank accounts, consumer protection, and navigating government programs. From July 2015 through December 2016, FEPS helped 14,434 people access $39.6 million in income through tax filing and one-on-one financial help.
Chartered professional Accountants (CPA) Ontario: CPA (Ontario) mobilizes, trains, and supports thousands of accountants annually to provide volunteer tax preparation services in their communities. In 2014, over 2,200 CPA volunteers prepared more than 24,000 tax returns.
Get Your Piece of The Money Pie: Led by the New Brunswick government, this initiative helps connect residents to benefits and credits they may be missing and encourages them to tax file. With the help of partners, it has resulted in an increase of: 36 per cent in tax filing by low income residents, 113 per cent in the number of tax clinics, and 60 per cent in the number of clinic volunteers.
Make Tax Time Pay: E4C’s volunteer program in Edmonton helps people with low and modest incomes to tax file and access government benefits. In 2016, 260 volunteers completed 4,300 income tax returns, enabling clients to access a total of $6.7 million in tax refunds, GST credits, and child benefits combined.
An earlier version of this article was posted on the Prosper Canada Website.