Social Policy in Ontario

File a tax return, raise your income

Posted on February 20, 2010 in Inclusion Debates

Source: Toronto Star — Authors: James Daw

A single mother earning $15,000 a year could get about $8,000 extra income from tax, child and other benefits.

She would then have about $23,100 to spend. Single mothers earning much more could also qualify to raise their income.

In most of the examples shown in a chart here, the tax and other benefits offset entirely what is deducted from pay for taxes, Canada Pension and Employment Insurance.

But to enjoy such benefits you have to complete and send in a tax return. Social advocates say many permanent residents of Canada are missing out.

They don’t know to apply for child, sales tax and other benefits. They don’t know they must report their income annually to qualify for benefits, and for tax refunds.

John Stapleton, a consultant who works with the Metcalf Foundation and a volunteer tax preparer, recalls a study conducted before he retired from the Ontario government.

One hundred welfare recipients who were not collecting child benefits included 95 who had never applied for those benefits, or had not completed a tax return. Only five were not eligible for benefit.

“Many Canadians are led to believe they should not have to file a tax return because their income is low,” says Stapleton.

Yet he calculates the tax system delivers some $21 billion of extra income from the federal and provincial governments, including $7 billion in Ontario.

Many who collect social assistance or welfare cheques may still believe their income would be cut back if they also applied for child benefits, he says. This has not been the case in Ontario since mid-2008.

Stapleton has met low-income Canadians who do not file a tax return because they fear private lenders or banks will try to collect debts from their benefits.

But the Income Tax Act is supposed to protect tax refunds, sales tax credit and other benefit cheques, including Ontario’s child benefit and senior homeowner’s property tax grant.

The Canada Revenue Agency may hold back tax refunds to pay old student loans or other debts to government. But the tax filer may be better off than having the debt hanging over them for years.

There are many reasons for missing out on benefits: Lack of awareness, lack of reading or mathematical skills, bad experiences in other countries, fear of abusive spouses who demand the benefits.

Many low-income earners may lack a computer to use online tax software that is free to those earning less than $25,000. Many lack a bank account to receive a direct deposit or to cash cheques cheaply.

Canada Revenue Agency sponsors tax preparation clinics, free to low-income earners, using volunteers. These clinics get busy near the April 30 tax deadline, and volunteers may not talk about other government benefits.

 [  See Chart:  http://media.thestar.topscms.com/images/d2/c2/72d9d1934d5ea3a13cf4a4cd1509.jpeg  ]

Last year staff at Toronto charity St. Christopher House helped 1,359 low-income clients find $3.48 million in tax savings and benefits, an average of $2,564 each.

Executive director Maureen Fair asks why governments don’t use a similar program to ensure more needed benefits are delivered.

Stapleton argues that governments could be doing many other things to simplify tax preparation.

“We are aware that (the) pickup for tax credits has not been as high as it could be,” says Leslie O’Reilly, spokesperson for Ontario Revenue Minister John Wilkinson.

“We are looking at ways to educate low-income Ontarians about the tax benefits and using easier-to-understand language when talking about the tax benefits in printed and web materials.”

Most Canadians are proud we have social benefits for low-income earners, young parents and the elderly. If you have good reading skills and know someone who could be missing out, you could do some homework.

Consider visiting the websites of the Canada Revenue Agency, Service Canada, Ontario Ministry of Revenue and Service Ontario.

jdaw@thestar.ca < http://www.thestar.com/business/article/768516–file-a-tax-return-raise-your-income >

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