After not filing her income taxes for three years, Janet Smith is struggling to find all the paperwork she needs to send to the Canada Revenue Agency.

As someone with a low income, she's expecting to receive government benefits once her taxes are filed. 

"That could probably help me make ends meet. Right now, being on disability and just scraping by, sometimes not even scraping by, it's pretty tough," she said. 

'This is a huge deal. Huge for families that are literally almost not being able to meet their basic needs on their income. And it's free, it's tax-free.' — Franco Savoia, Vibrant Communities Calgary

"It's been a while since I filed taxes, there's a lot of new things that have come out since I last filed. A lot of benefits that I'm sure I qualify for that I'm missing out on."

Filing taxes is becoming the key strategy for organizations looking to lift people out of poverty. It's also a way to stimulate the economy in parts of the country in a downturn. The challenge is convincing low-income households to actually do their taxes, since that demographic has the lowest filing rate. 

Janet Smith knows she's missing out on income returns because she hasn't filed her taxes in three years0:39

Families, in particular, are at risk of missing out on thousands of dollars of benefits and credits that are only accessed by completing a tax return. 

"It's extremely important," said Franco Savoia, with the poverty reduction group Vibrant Communities Calgary. "This is a huge deal. Huge for families that are literally almost not being able to meet their basic needs on their income. And it's free, it's tax-free."

A family of four with both kids under five and a working annual income of $40,000 qualifies for more than $13,000 in Alberta, which offers its own tax credits.

"To me, if we have one family in Alberta that hasn't filed their taxes for 2015, we got to to get them to file it or else shame on us," said Savoia. "If every poor family actually filed their taxes, this could be life-changing. This is not small stuff."

For agencies like Savoia's, having poor people do their taxes is becoming the quickest way to help them get out of poverty. Government benefits are increasing, but without a tax return, you don't qualify.  

Franco Savoia on the critical need to help the poor file their taxes0:37

How many miss out?

Several not-for-profit groups offer free tax clinics to help low-income people with the paperwork, but many still don't get their taxes done. Exactly how many is difficult to pinpoint.

The Toronto Daily Bread Food Bank found in a 2005 survey that 25 per cent of its users had not filed their taxes. Others suggest the rate could be lower.

"Based on past experience, I think you could guess that about five to 10 per cent of low-income families are not getting the GST credit and the child tax benefit that they are entitled to," said Richard Shillington, a social policy researcher.

The CRA would not say how many families are not filing their taxes. Instead, the agency said it has issued more than 9.3 million Canada Child Benefit payments, totaling over $5.5 billion in the first three months of the program. The agency is on track to issue the $23 billion the federal government estimated for the first year of the program in the budget.

"We don't know exactly how many people don't get their tax returns filed. That would be of interest," said Gordon Turtle with the Chartered Professional Accountants of Alberta. The agency organizes several free tax clinics.

"We know from our own experience the tax clinics are well received by community groups and their clients," he said. "I think the accounting profession would be interested in those kind of statistics." 

Tax benefits for a low income family

A boost during a downturn

If every low-income household filed their taxes, it could provide some much needed economic stimulus in parts of the country struggling through a downturn.

"If they earn more, they will spend more," said Mary Moran with Calgary Economic Development. "That is on things that are basic to you and I, but they may see as a luxury such as cultural events, putting their kids in sports or buying new running shoes. Definitely, earning more has a direct impact on the economy."

Low-income families are more inclined than people in other income brackets to spend money locally because a higher percentage of their income goes to basic needs such as housing, food and utilities.

"We really do care about this," said Moran. "During an economic downturn, it makes it even more important because there's a large percentage of the population teetering on poverty." 

Mary Moran on the economic benefits of low income households filing their taxes0:26

Why not file?

Smith said she didn't file her taxes three years ago because all at once she suffered a business failure, one of her parents died and she had major back surgery. Getting the papers together for her taxes wasn't a priority. She's still trying to find all the documents she needs to catch up.

"Dealing with health issues and emotional issues — it makes it tough," Smith said. "Enough was enough. I just had to put it off."

'The sooner you do it, the better. The longer you wait, the worse it is going to get.' — Janet Smith

She hopes to finish her taxes soon, after doing the paperwork on and off for the last four months.

"It's going to feel phenomenal. I do have some debts that'll get paid out with any money I get back from this," she said. "The sooner you do it, the better. The longer you wait, the worse it is going to get."

Prosper Canada, a national charity, lists barriers to tax filing felt by people with low income:

  • Complexity
  • Low awareness of benefits available
  • Lack of mailed tax forms
  • Low computer access
  • Low literacy
  • Lack of access to advice
  • Newcomer status
  • Low self-confidence and trust
  • Difficulty assembling documents

The CRA does have copies of many documents someone needs to file their taxes such as T4s, T5s, RRSP receipts and some tuition records. They would not have charity receipts or health expense records, for example.

Free tax clinics are helpful, but some advocates, like Savoia, say much more needs to be done.

"We have to pull out all the stops, all the stops, to make sure that every single vulnerable family, every single vulnerable individual files their taxes."

The risk, he said, is that governments will see low participation rates and reduce or cancel programs like the child benefit.