Hi … i have a client that received a retroactive canada pension plan payment dating back to December of 2020 and received a lump sum in 2022. The large payment is the only income the individual received. For the 10 years prior to December 2020 the person received tax free disability Ltd. The research i have read said there is a process that i can initiate with the CRA to spread the income from 2020 to 2022 for the retroactive life of the payments. I have the payment stub. I just don’t know the procedure with the CRA to fix this for the person. I received the tax information late and already filed to avoid fines and CRA being difficult to get a hold of.
I thought Service Canada provided the retro breakdown automatically to CRA for such CPP payments without need for the T1198?
You file the T1 return to report the the entire T4A(P) slip on the client’s 2022 return.
If it benefits the client to have the income allocated over different years the CRA automatically does this calculation from their end and assesses the 2022 return with the adjustments. The client will receive a notice of assessment advising them that a special calculation has been applied and the amount owing / refund will differ from your filing.
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My client received several lump sum pension payments the last few years and was provided the T1198 filled out by the securities service that made the payments. We had to file the T1198 and paper file the T1 returns if we wanted the QRLSP to be assessed to prior years. The last one was small enough that I didn’t bother to file for the adjustment.
Thanks for the help. I saw the assessment. As was said in the thread previously, you just enter the slip normally and the CRA automatically accesses the taxes to the most advantageous amount for the years affected. The taxable income was adjusted in this particular case. Did not need a T1198 for CPP. Once again thanks, everyone.
I have a similar situation. I understand the process, just want to confirm that we can efile this normally? No mail in?
Similar. Is it CPP or something else?
Yes, CPP retroactive. I understand we report full amount on 2023 return and CRA will determine whether it’s beneficial to apply previous year amounts to previous tax years. Just want to make sure that I can efile this as normal and I don’t have to send special with a letter or something???
You do not need to do anything special on your end. You can efile the tax return as you normally would. The CRA will decide whether it is to the client’s benefit to allocate the income to the years which it relates. The return will normally be held up in processing for a bit. If you calculate the client owes tax they might want to wait until they receive their NoA, as the amount you calculate and the amount the CRA calculates could be markedly different.