Income Tax and Payment explanation statement

Finally the payment explanation statement is arrived after approval of the CPPD, the whole application process took me 5 years since 2017 to 2021, now CPPD is paying 40K to insurance company, the problem Im having right now is the tax on this 40K + I guess another 20K for the child benefit ?? Im wondering how to report this income? do I have to file income tax again on these years from 2017 to 2020? Besides, it also mention that I can have tax deducted from my regular monthly CPPD benefit payments, is there any benefit to do so? any difference to deduct every month? I guess the only way to reduce income tax is to buy RRSP this year ? wondering any other way to save some money on tax?

CRA will do the adjustment when you file your return. They know based on the lump sum that they have to make the adjustments. You don’t have to fo anything but declare what’s on the T4A they provide.

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I would send a letter with your return reminding them to do the adjustments for the years the back pay is for.

how do I spread the tax over the past few years?

CRA will do adjustment After I filed my return for 2021? that would cause me to pay lots of tax?

Kellyann says CRA will adjust your taxes for prior years so you won’t pay lots of tax.
You won’t know the amount for 2021 but it won’t be what you filed.
I won’t include a note.
You could phone CRA to make sure they will do the automatic adjustments.

Im wondering is there any pro or con for having federal tax deducted from your Canada Pension Plan ?

Pro:

  • you are less likely to accidentally spend the tax money
  • if you are bad at saving it can work as a kind of forced savings by overpaying and getting a refund

Con: you are effectively giving the government an interest free loan in the amount of your tax refund