Tax Court ruling: Good news was, UBC research assistant could claim for EI. Bad news, he had to pay income tax
JOEL PAGE / REUTERS
Students often take on research for professors as a way to make money.
Students often fund part of their university education by working on research projects for professors.
But they should keep in mind that the way the compensation is treated because it can have an impact on how much tax they pay and whether they are entitled to benefits like employment insurance.
That’s what former UBC research assistant Joshua Rizak discovered when his claim for Employment Insurance was turned down after he dropped out of a Ph.D. program. He couldn’t afford to live on the $21,000 a year he was being paid, but continued to do the work for several months after he quit.
He thought he was being paid for doing a job and so was entitled to EI. But when he tried to claim it, the Minister of National Revenue turned him down. The agency claimed the cash paid to him between September 2008 and May 2010 was a scholarship or fellowship and so he was ineligible for the benefit.
Rizak appealed to the Tax Court of Canada and won. The court ruled that he had a job, not a fellowship. So the good news was he could claim EI, the bad news was that he had to pay tax on his earnings
UBC viewed the money he received as a fellowship paid out of a research grant so no EI premiums were remitted by his professor. When he was no longer a student, the professor continued to pay him from his grant.
The Tax Court judge noted that if the student was simply conducting research directed by a professor it was more likely to be characterized as income for EI purposes than if he was doing independent research as part of the academic requirements for a degree.
Based on the degree of control the professor had over Rizak’s work, the judge concluded Rizak was an employee. Therefore when his job at UBC ended, he was eligible for EI benefits claimed based on the full period he worked for Wang before, during and after he was registered as a doctoral student.
However, in his decision the judge questioned why Rizak believed he could “have his cake and eat it too” by denying he was an employee for income tax purposes while at the same time claiming he was an employee for EI purposes.
Timothy Fitzsimmons, a tax partner in the Toronto law office of Dentons, says to avoid surprises, universities and graduate students should carefully evaluate the nature of support paid as part of graduate programs.