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Posted on Sep 1, 2014

Issuing T4As to Students

Issuing T4As to Students

by Tim Williams, SCSBC Director of Finance ◊

Non sequitur is Latin for “it does not follow” and is often used to describe the logical disconnect between the premises within a reasoned argument and the conclusion. When dealing with bureaucracy, it is often wise to quote the proverb, “Don’t look for logic where there is none,” in order to keep one’s composure and sanity.

SCSBC recently sought a tax ruling from CRA Income Tax Rulings Directorate in relation to whether our schools should be issuing T4A slips each year to students who receive tuition fee reductions in various situations, for example, a discount due to the parent’s financial situation, a teacher discount, or a scholarship. Our argument to CRA was that given that this “benefit” is exempt income in the hands of elementary and high school children under Ruling S1-F2-C3 (Para 3.92), our schools should not be required to issue T4A slips to children. Further, we argued that it is potentially confusing to give a six-year-old child a T4A slip and have to explain to parents that the income is exempt and that no tax return needs to be filed. Lastly, we argued that there is a huge administrative burden to both our schools and CRA for which there is no impact to the revenue of Canada.

CRA has advised us that indeed schools must issue T4A slips to students. They have also confirmed that the income reported on the T4A slips is exempt income and no income tax filing is required by the child.

To be fair to CRA, their staff must implement the law as it is written and the law requires that a T4A must be issued notwithstanding that the student may be eligible for a full exemption pursuant to section 56 (3)(a) the Income Tax Act.

Jesus said in Mark 12:17, “Render to Caesar that which is Caesar’s….” The Apostle Paul said in Romans 13:7 “Give to everyone what you owe. Do you owe taxes? Then pay them. Do you owe anything else to the government? Then pay it. Do you owe respect? Then give it. Do you owe honor? Then show it.” We therefore desire to willingly submit to CRA and their directive to us. The good news is that the income is exempt, so no coins with Caesar’s image need be given.

We are advising schools to issue T4A’s to students for the 2014 income tax year for the assistance and benefits received by those students including:

  • Assistance provided in the form of reduced tuition fees where the student’s parents have applied for the reduction based on their financial situation
  • Assistance provided in the form of a reduction of outstanding fees, again due to the parents’ financial situation
  • Scholarships provided to a student
  • Teachers’ and faculty members’ children who are provided with a discounted tuition to the school
  • Discounts or scholarships provided because the parents are members of a local church connected with the school

T4A’s would not be required for the following situation:

  • Where the school publishes standard tuition rates for families with multiple children that apply to all families regardless of income levels and where no special application is required to obtain a family rate.

Since this situation carries the possibility of administrators being faced with a number of confused parents and perhaps even some angry ones, we are also suggesting to schools that they send parents of the affected children an explanatory letter, together with the child’s T4A, outlining the reasons for issuing the T4A and the exempt nature of that income. SCSBC will draft a sample letter for your school’s use and make it available to you at the appropriate time.

Given that T4A’s require a SIN number, we are suggesting to schools that they collect each child’s SIN number, along with other personal information normally collected by schools such as BC Medical number at the time of enrollment. This will prevent the need for the school to withhold or collect income tax from the child.

We trust that this short article will help prepare you for any calls you may receive after Christmas.

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