Helping First Nations, Inuit and Metis with Tax Filing

Geoff Currier & Evelyn Jacks

The Canada Revenue Agency is trying to reach out to Canada’s First Nations, Inuit and Metis to encourage them to file their tax forms on time and could use your help to make sure these communities get all the tax benefits they are entitled to. But filing tax returns are not always easy, especially when there is income on and off the reserve.

Exempt Income.  There might be some First Nations individuals whose income is tax exempt. It’s important that they file their Form T90 Income Exempt From Tax Under the Indian Act, to qualify for important tax benefits based on net income.  This includes the refundable Canada Training Credit.  Examples of how this credit works with Knowledge Bureau tuition fees paid can be found here.

Is it Taxable?  There may be some uncertainty when it comes to whether or not this person’s income is taxable, and in fact that’s where things can get quite complex. Under Section 87 of the Indian Act, employment income is considered tax-exempt “personal property” when earned on a reserve.  Factors that connect income to a reserve include whether the individual is registered under the Indian Act, where they live, where they work and where the employer is located.  Where some of the work is performed both on and off the reserve, proration is required.

Related income that may be affected by these rules include employment insurance benefits, CPP/QPP benefits, Registered Pension Plan benefits, retiring allowances and wage loss replacement plans.

What Benefits can be Missed.   If you have clients who are First Nations, Inuit or Metis you can remind them of the many benefits they stand to miss if they do not file. They include:

• The Canada Child Benefit. Families may receive up to $8,157 for each child under 6 and up to $6,883 for each child 6-17. A provincial or territorial payment may be included as well.
• The Canada Groceries and Essentials Benefit (formerly the GST/HST credit) Your clients may not be aware of the change to this benefit. They may not know that if they received a GST/HST credit in January they will receive a top-up payment of double that amount in June.
• The Canada Training Credit.This can produce a refundable tax credit of 50% of eligible tuition fees paid depending on age and income (and as above, the filing of the T90) .
• The Canada Workers Benefit. Eligible individuals may receive up to $1,665 and eligible families whose income is less than $49,000 may receive up to $2,869.
• The Guaranteed Income Supplement (GIS). Beginning this July, eligible individuals may receive up to $1,108.74 annually. Married couples or those in common-law relationships could receive up to $667.41 each.

Remember to point out to your clients that these amounts will not apply to everyone and the words “up to” must be underlined. In the case of a married couple or those in a common-law relationship, both partners must file and family net income is considered.

Non-Refundable Tax Credits are Important Too.  When speaking with your clients, be sure to inform them of the Disability Tax Credit and Medical Expense claims as well. They could be eligible and not know it or may not know how to apply and this can make a big difference when income is taxable.

A part of your job is to educate your clients about their taxes and benefits. They will need to know what is required when they file:

• A valid government issued photo I.D.
• SIN number
• T4 and T90, as well as another other necessary slips
• Receipts (like medical expenses etc.)
• If possible a previous notice of assessment to help with CRA’s digitization push

If your clients are among  the 7% of Canadians who are still filing by paper, they should be able to find a short form at any of the following locations:

• Band council offices
• Friendship centres
• Community representatives
• Service Canada locations
• CRA Northern Service centres
• CRA Outreach Officers

Bottom Line.  Some of these clients will be invited to new “Automatic Filing” in the future.  Still it’s important to note that post-assessment audits can emerge as family net income or the declaration of conjugal relationships come into question by the CRA.  As with all of your, it cannot be stressed enough the importance of good communications throughout the year, great record keeping and on-time filing, even for nil income returns. Be sure to help these clients receive all the benefit and credit payments they are due. . .and then keep them!