Federal government to help more Canadians tax file and access benefits

2 February 2016

Canada Revenue Agency to extend a helping hand

Financial empowerment efforts received a major boost in November when Prime Minister Trudeau instructed Canada’s newly minted Minister of National Revenue, the Hon. Diane Lebouthillier, to help more Canadians access benefits they are entitled to and make it easier for Canadians with low and fixed incomes to tax file.

In her mandate letter from the Prime Minister, Minister Lebouthillier was tasked with working with the Canada Revenue Agency (CRA) to:

Proactively contact Canadians who are entitled to, but are not receiving, tax benefits
Offer to complete returns for some clients, particularly lower-income Canadians and those on fixed incomes, whose financial situation is unchanged year-to-year
Support more Canadians who wish to file taxes using no paper forms
Deliver correspondence and other communications that are straightforward and easy to read.

Tax filing a gateway to more income and benefits

This is welcome news to organizations working with people with low incomes, as tax filing is still the fastest way to boost their incomes if they haven’t filed and to qualify for other non-tax benefits. In Ontario, for example, tax credits can account for up to 40 per cent of the income of a single-parent family on social assistance with children.¹

Tax filing is also how Canadians with low incomes become eligible for government grants and matching dollars linked to the Registered Education Savings Plan (RESP). Families with children born January 1, 2004 or after that qualify for the National Child Benefit Supplement can get up to $2,000 per eligible child for their education when they open an RESP and apply for the federal government’s Canada Learning Bond (CLB). Parents need to tax file, however, to be eligible for the CLB and matched savings incentives through the Canada Education Savings Grant.

Through the Registered Disability Savings Plan (RDSP), people with disabilities and low incomes can qualify for up to $70,000 through the Canada Disability Savings Grant and up to $20,000 through the Canada Disability Savings Bond over their lifetime.²To access these benefits, however, people with disabilities need to tax file to establish their eligibility.

Tax refunds can help stabilize household finances

Tax time is also an important opportunity for families with low incomes to stabilize their household finances. Tax refunds are often the single largest cash infusion low-income households receive each year. This may be the one time a family can afford to make big-ticket purchases³or set aside emergency savings they can use to smooth volatile income from precarious jobs and to manage unexpected expenses.

Connecting people to benefits is good for everyone

Tax benefits and refunds improve the lives of low-income beneficiaries, but are also good for society as a whole. Evidence shows take-up of the Canadian Child Tax Benefit (CCTB) improves children’s educational outcomes and physical and mental health, while families receiving the CCTB show increased spending on food, childcare, and transportation and reduced alcohol and tobacco use.^4,5,6Newcomer families receiving the CCTB also show declining participation in traditional welfare programs like social assistance.⁷ Finally, for governments, tax filing and take-up of benefits help to stabilize the economy during crises by mitigating shocks to household incomes.⁸

Ways the government can help more Canadians to access tax and other benefits

When it comes to connecting Canadians living in poverty with income benefits, the federal government’s proposed actions are great first steps, but why stop there? Here are some additional ways the federal government can connect more Canadians with low incomes to the benefits they are entitled to:

Improve benefits design and delivery -- Look for ways to streamline the design of benefits to make it easier for people to access information, apply and receive benefits. Apply plain language standards and user-centred design and testing, and look for ways to avoid steps that force people with low incomes to take time off paid work and/or incur additional expenses (e.g. childcare, transportation, government fees) -- a major barrier for many.
Wherever possible, leverage technology to facilitate screening, form filling and delivery, while still providing other options for those who lack access to secure computers or the skills to navigate online processes. New tax preparation and benefits screening technology have helped to effectively equip many intermediaries working directly with low-income communities to increase their benefits take-up. In the United States, Benefit Bank allows social workers to prepare income tax returns and automatically apply for benefits on behalf of clients, helping them access $1.145 billion in refunds and benefits since 2006. Similarly, EarnBenefitsis a web-based benefits screening application that over 100 U.S. community organizations have used to help over 214,000 households access over $287 million. Similarly, United Way Calgary’s online Benefits Navigatorwas created to help Calgarians identify income tax benefits they may be eligible for. These initiatives are examples of well-designed applications of new technology that build on organizations’ pre-existing outreach capacity to help low-income individuals and households.
Undertake advertising and outreach campaigns and monitor results -- Information and outreach campaigns can be very effective, as the government’s past effort to boost GIS take-up has shown.⁹ While the federal government does currently undertake some promotional activities (e.g. Service Canada’s Mobile Outreach Service delivered information sessions on OAS, CPP, and GIS to 24,000 seniors and caregivers, particularly in rural areas), it is hard to access information on how well these efforts are working and active outreach for some benefits has been scaled back (e.g. Canada Learning Bond) or are non-existent. Community organizations have a critical role to play in outreach to people with low incomes. For example, the Peel Children and Youth Initiative’s Enrolled by Six community partnership to promote RESPs has increased the number of children enrolled in RESPs and the Canada Learning Bond from 29,783 to 54,328 and increased education savings in Peel Region (Ontario) by over $49 million.¹⁰ A consultation and review of best practices with respect to outreach to promote tax filing and benefits uptake could benefit multiple federal departments and help engage and inform complementary efforts by community organizations across Canada that are eager to work with the government to help their clients access entitlements.
Expand the Canadian Revenue Agency’s Community Volunteer Income Tax Program (CVITP) -- In 2014, the CVITP helped over 2,000 organizations mobilize 16,000 volunteers to file over 600,000 tax returns.¹¹ However, most tax clinics are only open in tax season making some people with low incomes wait to access urgently needed income. The CVITP also does not provide tax filing support for the self-employed, a large and growing group. Innovations to help people who cannot travel to tax clinics are also needed. In the U.S., the Internal Revenue Service’s Volunteer Income Tax Assistance (VITA) programhas begun to incorporate innovative, electronic delivery models, including Virtual VITA, which offers a cheaper, more scalable way to provide free tax help.¹²This and other new tax filing approaches offer important opportunities to learn and innovate to better support tax filing in Canada. The growing number of Canadian companies, particularly in the financial services, seeking employee volunteer opportunities suggests there is also potential to mobilize far more volunteers if we can put effective national partnerships and a matching system in place. Consultation and a review of innovative approaches can help identify ways to address these and other opportunities to strengthen CVITP and identify concrete opportunities for broader cross sectoral collaboration.
Leverage existing service delivery platforms to help Canadians access benefits -- Supports to help more Canadians tax file and access benefits can be sustainably scaled up by embedding them into service systems with existing infrastructure, resources and reach into low-income populations. The focus should be on integration into services where it can both help advance the mission/objectives of the system in question and connect clients to benefits. Potential examples include: provincial/ municipal employment centres, social assistance offices, Service Canada outlets, primary health care and community health centres, neighbourhood multi-service centres, provincial income support programs for people with disabilities, First Nations health and social service programs, elementary and secondary schools (for RESPs), settlement services etc.
Build on existing national efforts, partners and tools -- A number of national organizations are already working to connect Canadians to benefits-- e.g. PLAN Canada and the RDSP, Omega Foundation and the RESP. By partnering with these organizations and facilitating partnerships with other key stakeholders (e.g. other federal departments, provincial governments), CRA can dramatically increase the help available to Canadians who are having trouble accessing their entitlements. Existing online tools and resources (e.g. Omega Foundation’s SmartSaver RESP tools, PLAN’s RDSP portal and calculator) can also be disseminated and promoted and additional tools developed (e.g. Future Planning Tool for People with Disabilities¹³online benefits screener for all federal/provincial benefits,¹⁴tax filing software optimized for benefits take-up, etc.) that enable more partners to help more Canadians access benefits.

Prosper Canada will be engaging CRA to discuss ways we can support their efforts and work together to engage and support other government, community and private sector partners to help Canadians access tax credits and other income benefits that build their financial wellbeing.

Notes

¹ Ontario Ministry of Community and Social Services, “The Role of Refundable Tax Credits.” Available at: http://www.mcss.gov.on.ca/en/mcss/publications/social/sarac/role_refund_sarac.aspx
² Tom McFeat, (December 30, 2011), “Registered Disability Savings Plans: Why don't more have them?” CBC News accessed October, 1, 2015.
http://www.cbc.ca/news/business/taxes/registered-disability-savings-plans-why-don-t-more-have-them-1.1042380
³ For instance Andrew Goodman-Bacon and Leslie McGranahan, (2008), “How do EITC Recipients Spend their Refunds,” Economic Perspectives 32, accessed August 23, 2015, https://www.chicagofed.org/publications/economic-perspectives/2008/2qtr2008-part2-goodman-etal
⁴ Kevin Milligan and Mark Stabile, (2011), "Do Child Tax Benefits Affect the Well-Being of Children? Evidence from Canadian Child Benefit Expansions," American Economic Journal: Economic Policy 3: 33, 175-205.
⁵ Ibid.
⁶ Lauren Jones, Kevin Milligan, and Mark Stabile, (2015), “How do Families who Receive the CCTB and NCB Spend the Money” (Toronto: Martin Prosperity Group), accessed August 23, 2015 http://martinprosperity.org/media/CCTB-and-NCB-Family-Spending.pdf) ; Mark Stabile and Lauren Jones, (April 21, 2015), ”The Truth About Canada’s Benefits,” The Globe and Mail, accessed August 23, 2015,
http://www.theglobeandmail.com/globe-debate/the-truth-about-canadas-low-income-benefits-they-work/article24042813/
⁷ Yuri Ostrovsky, (2002), “The Dynamics of Immigrant Participation in Entitlement Programs: Evidence from Canada,” Canadian Journal of Economics 45, 107-132.
⁸ Eurofound, (2014), “Access to Benefits in Time of Crisis,” Unpublished Working Paper, ([Dublin]), accessed August 23, 2015, https://www.eurofound.europa.eu/access-to-benefits-in-times-of-crisis
9 Strategic Policy and Research Branch, Human Resources and Skills Development Canada, “Evaluation of the Guaranteed Income Supplement Take-up Measures and Outreach - Final Report,” February 2010. http://www.esdc.gc.ca/eng/publications/evaluations/income/2010/february.shtml
¹⁰Enrolled by Six: http://www.pcyi.org/uploads/File/eb6/PCYI_Enrolled_By_Six_Strategy_Overview_Final.pdf
11 Canada Revenue Agency, (January 26, 2015), “Make a Difference in Your Community,” accessed October 1, 2015, http://www.cra-arc.gc.ca/tx/ndvdls/vlntr/rtcls-eng.html
¹² In New York City, a 2012-3 Virtual VITA pilot through Head Start and the Food Bank found that virtual returns were faster and cheaper to prepare. The program targeted two groups: families with children who received the highest average refunds ($2,708) and newcomers who were already receiving financial counselling, building on a pre-existing community program
(See: http://www.nyc.gov/html/ofe/downloads/pdf/20140117_VirtualVITAProgramInsights.pdf)
A Virtual VITA pilot in Lansing, Tucson and Chicago found that the model was successful, but that clients were put off by the name “virtual,” which created distrust, anxiety, and misunderstanding.
(See: http://www.economicprogress.org/sites/economicprogress.org/files/virtual_vita_final_2014.pdf)
The National Disability Institute and United Way of Tampa Bay led a Virtual VITA pilot in Tampa Bay to help deaf and hard-of-hearing taxpayers use sign language to complete their tax returns via videophone at remote intake sites (part of a nation-wide program called Deaf Tax). This pilot helped 92 tax filers (20 of whom were deaf) receive $78,000.(See: http://www.realeconomicimpact.org/taxes-and-tax-preparation/virtual-vita)
¹³ Currently in development by PLAN and Prosper Canada with support from ESDC.
¹⁴ Currently in development by Prosper Canada with support from Intuit Canada