A client of mine has an estate tax return and number and in 2022 received cpp for back payments dating back to 2019 and 2020.
We need to include this as income in 2020 t3 tax year as it was received in 2022. Where in tax cyle t3 should i enter box 14 retirement benefit of $26,000 and enter box 20 of taxable cpp benefit of $22,000?
First I would query if it is reportable as a 2020-T1 Sec 70(2) “Right or Thing” – seems to me there was a discussion about this subject some time back, but it could have been in a different location. If the deceased was entitled to it, but had not received it, there may be a different approach to be made if applicable.
My understanding is that when Service Canada pays a lump-sum, you report it in the year received; however, CRA is supposed to do a calculation to determine whether the tax is lower by reporting it in the year of receipt or if it was reported in the year(s) to which the retro payment applies. Any interest included in the lump-sum is taxable in the year of receipt. I’m not sure how or if they do this when someone has passed away.
This link might be of interest:
It may also be worth contacting CRA (or simply filing, if applicable) given both COVID and the lengthy period of time it took CPP to come up with amounts to see if CRA will accept a late-filed 70(2) return…they well may. I’m guessing that taxwise, this would be the least expensive filing method.