I’ve been reading on here that others, like me, have a lot of anxiety about CPP-D and taxes. While I was pleased to get CPP-D (to strengthen my case if LTD cuts me off), I was frustrated. I was angry that LTD got to deduct CPP-D amounts off their payments to me. So many losses already…having something that seems to be “mine” taken by LTD was another insult. Oh well. Having CPP-D be a taxable income was also stressful. Here is what I learned that may help you: I was awarded a 15 month retroactive payment that spanned 3 tax years, and then moving forward, the full next tax year. This meant over $20,000 in “income”. When I talked to CRA and CPP-D, I was told contradictory things. One was: I had to report the lump sum ($20,000) for the tax year I got the lump sum in, and they would automatically decide how to distribute the taxes in my best interest. Note that basic personal tax credit amount is $11,000 federally, with another $18,000 in some provinces, so those of you below that shouldn’t worry. I think the max CPP-D payment is just over $12, 000 in 12 months.
Anyways… Reporting the lump sum retro payment plus tax year payments of $20,000 is a disaster for me as it makes me ineligible for low income programs in 2018, as many use $16,000 as the low income cut off… So, in addition to the CPP-D going to LTD, and being taxed on CPP-D…now I stand to lose the low income supports that are so vital to me. Ugh!! I kept searching for answers, and was told to go pay an accountant. Thanks (not). More money I don’t have to pay for a mess created by LTD/CPP-D…
The other thing I was told which was contradictory was: only put the current tax year’s cpp-d amounts as income, and file a form T1198 to have things assessed for the other years included in the lump payout. Can only submit this by filing a paper return!! Might result in being able to list the 12 months of CPP-D as income in 2017 tax year vs. lump sum (15 months) plus the 12 months… This is what I will try to do. I’ll let you know the outcome… If you have been through this, I’d welcome advice.
How does this apply to you? Keep the letter you get from Service Canada that shows the years and amounts paid in your lump sum. This helps you break it down. The t4a § you get will only show the whole amount for the retro payment plus the present tax year. In addition, make calls to CPPD, CRA, and any low income support programs you use. For example, I found out that programs who use tax info will cut me off automatically if I can’t address what my income will sit at for 2017. I’ll have to appeal to show the income in 2017 I got was for 3 years…and jump through many other hoops. Was told I will need to prepare to lose the low income support for 2018 (that starts in july) for at least 6 weeks while I appeal and they confirm my income inflation was due to lump sum retro. This means I need to get extra prescriptions to cover the 6 weeks (assuming I win the appeal)… I haven’t looked into the other low income supports programs to see how I will handle those, or if they will even care that the payment was lump sum.
One other word of advice: I didn’t submit medical expenses for a number of years on taxes as I had no income to deduct them against. I wish I had, as they would help offset any taxes I may be responsible for with CPP-D lump sum. I can go and redo my medical expenses for those years, but that sucks. Would’ve been easier to do it at the time.
Clear as mud? Good luck all.