Hi everyone. I am new here. I have read through many of the questions that seem to relate to my issue but I can’t find the answer I’m looking for and I’m feeling really stuck as I don’t know if I should be fighting the CRA or not. I will endeavour to outline my situation as clearly as possible. There are a lot of numbers involved and I’m not sure what is relevant at this point. It’s going to be a long explanation but hopefully somebody can help me out.
I went on LTD in Feb 2015. At that time my monthly payments (after tax) were $2,561.50. As expected they pushed me to apply for CPP-D and I was approved in July 2017, There was a lump sum payment of $14,925.88 paid directly to my insurance company, SSQ. The lump sum payment outline sent to me by CPP is as follows:
2017 (7 months): $754.47 per month = $5,281.29
2016 (12 months): $744.05 per month = $8,928.60
2015 (2 months): $735.23 per month = $1,470.46
Taxable Benefit: $15, 680.35
Less Withhold (Private Insurer): $14,925.88
Total CPP Payment: $754.47
That’s the first set of numbers. Now, as far as I can understand my LTD payments are taxable. Since I went on LTD I have received T4(A)s from SSQ and I got a T4A from SSQ this year with the following information:
Box 022 (income tax deducted): $3561
Box 107 (I assume this is net income? ): $27,461.16
So far I understand the numbers. However, they also sent me a letter with numbers I don’t understand. I will write them out exactly as they appear in the letter and then explain why I don’t quite understand what is happening.
Gross Long Term Disability Benefit: $3,023.66
Less CPP Benefit: $735.23
Revised Disability Benefit Payable: $2,288.43
For the period of Nov 1 2015 to Dec 1 2015
Benefits that were paid: $6,047.32
Benefits that should have been paid: $4,576.86
For the period of Jan 1, 2016 to Dec 31, 2016
Benefits that were paid: $36,283.92
Benefits that should have been paid: $27,461.16
For the period of Jan 1, 2017-July 31 2-17
Please note that you paid $3,235.12 in taxes when you should have paid $2, 077.25; a difference of $1,157.87. As such the overpayment on the file is calculated as follows:
Benefits that were paid: $21,165.92
Less benefits that should have been paid: $16,019.01
Less difference in taxes: $1,157.87
Overpayment amount: $3,988.74
Total overpayment = $1,470.46 + $8,822.76 + $3,988.75 = $14, 281. 96
Please note we have received a cheque from CPP in the amount of $14, 925.88. The amount of $14, 281. 96 has been applied towards to overpayment above. A cheque for the exceess amount of $643.92 will be issued to you.
Ok, that’s the contents of my letter. I did received and cash the cheque for the $643.92. Now, on to the actual problem. The woman who filed my taxes this year did not, I have learned, claim the CPP ‘income’ properly, at least it appears she didn’t. I put that in quotes because I did not see any of that lump sum money. She claimed $19,452.70 on Line 114 of my income tax. That amount includes the lump sum payment that went to SSQ, plus the remaining 5 months of CPPD that I did get. As a result, I had an almost $3,000 tax bill that I paid because she told me better to pay it and not be charged interest. She had contacted the CRA and explained the situation and they said to file a paper return and send in all the info and they would treat it accordingly.
So I paid it, and waited for the assessment. The assessment came and nothing was changed, financially, with the following explanation: “You received a CPP lump sum payment to pay you for earlier CPP benefits you did not get. Since you got the payment for this reason, it qualifies for a special tax calculation to see if it is better for you to include the payment in your income for 2017 or in the year the payment applies to. In your case, it is better to include the full amount of the payment in your 2017 return”.
Ok fine, I know that’s one calculation that has to be made about the TIMING of the payment. But my understanding is that because my LTD is taxable, and the insurance company got the money, I should not have to pay tax twice. So I requested an adjustment, and was talked through the online process with the woman saying request the adjustment on Line 229. So I did. Looooonnnngg story short (I had to call and explain my situation twice, and fax them in more copies of the docs I had already uploaded online), I just got a letter from the CRA saying the same thing they said on my initial assessment - that 'the total amount shown in box 20 of your T4A§ must be reported on line 114 of your return for 2017. We will not reassess the returns for the previous years to include this income". ARGHHH!
So my question (finally) is this - am I right? Should I be fighting the CRA to take into account the fact that my benefits are taxable and therefore I have already paid tax on this income and don’t need to pay that $3,000? Or am I wrong - does the information in the letter from SSQ sort that out with their tax overpayment and refund of $640 to me that they did in July 2017? I never quite understood that part of the letter and I am completely wiling to continue to harass and fight the CRA to look at my return properly and get at least some of my $3,000 back, but I need to know if it’s worthwhile.
I am feeling very frustrated and exhausted with all of this and would appreciate any guidance people have! Thank you.