Many Inuit participate in their communities even while having full-time jobs or long after they retire, notably Inuit elders. They sit on committees and boards, share knowledge at cultural events, provide advice to organizations, and take on contracts as translators and interpreters. In many cases, they are crucial in passing knowledge to the next generation and are valuable members of our communities. However, some are discovering that accepting paid opportunities can sometimes lead to unfortunate surprises at tax time.
Christophe Savoie-Côté, manager of the Makivvik Tax Program, explains the issue using the real-life example of an unidentified elder from a Nunavik community. Like many seniors, this person receives Old Age Security (OAS) and a Quebec pension earned after many years of work. During the year, this individual also earns extra income through small contracts, such as taking part in community events as an “Elder,” sitting on committees, or advising local organizations. None of these sources of income are especially large on their own. But when combined, this person’s total annual income got high enough to create unexpected tax consequences.
One of the main reasons this happens is that taxes are not always deducted from every payment received. Many assume taxes are automatically taken off their income, but this is not necessarily the case. Payments from the Quebec Pension Plan (QPP) and Canada’s OAS may have little or no tax withheld if it has not been requested at the time of applying for pension. Income earned as a freelancer or independent contractor typically has zero tax deducted. As a result, an elder may receive payments throughout the year without realizing that they are expected to set money aside to pay income tax later. When tax season arrives, they may suddenly owe several thousand dollars. There can be another surprise as well. When an elder’s total income rises above a certain level, the federal government can require them to payback the OAS pension they received through the year.
Nunavimmuit may think they are simply earning a little extra money by taking on small contracts. Instead, that additional money can increase their total income enough that they not only owe income tax on what they earned but must also repay part of the OAS payments and other benefits they already received.
The financial impact can be significant. An unexpected tax bill can create stress and make it more difficult to keep up with the cost of living. If the amount claimed is not paid, penalties and interest can add up, and the government can act quickly to collect, including garnishing income, freezing bank accounts, or the suspension of government support payments.
The tax system is hard to navigate for most and can be especially merciless with Nunavik elders. Government letters are sent only in French or English although many speak Inuktitut only, and the letters’ technocratic and administrative language is hard to read even for the most sophisticated accountants. Exchanges over the phone can be difficult. And online platforms such as “My CRA Account,” which is meant to facilitate access to services and information, require a certain degree of technical knowledge that makes them out of reach to many elders. Understanding tax law, notices of assessment, account balances, and government correspondence is not easy, even for people who deal with this jargon on a day-to-day basis.
Unfortunately, these experiences might also discourage Nunavimmiut from offering their services and accepting work opportunities in their community. After receiving an unexpected tax bill at year-end, an Inuk may fear that taking on paid work is simply not worth the risk. They may believe that whatever they earn will have to be paid back later.
That is unfortunate for everyone. Communities and organizations benefit greatly from Inuit knowledge, guidance, and experience. Nunavimmiut should not refrain from offering their services just because they fear it will translate into a financial burden.
Organizations that invite Nunavimmiut to work with them can play an important role in preventing these situations. Whenever possible, hiring Inuit beneficiaries as employees rather than as an independent contractor may reduce the likelihood of an amount owed at year-end because taxes are generally deducted from employee wages. When freelance contracts are necessary, organizations can help by explaining what it entails – that taxes will not be withheld from the payments, and that earning additional income could affect entitlement to benefits or trigger the payback of OAS payments.
A little information provided before an agreement is signed can make a meaningful difference later. By ensuring Nunavimmiut understand how paid work may affect their taxes and government benefits, organizations can help protect Inuit, like our unidentified elder, whose active participation in our communities matters tremendously.
If you or someone you know has questions about taxation you are welcome to reach out to the Makivvik Tax Program at tax@makivvik.ca, or by phone in Montreal (1-800-361-7052), Kuujjuaq (1-877-625-4845), or Puvirnituq (819-988-0400).
