LTD company made a mistake and CPP-D paid me out my retroactive

I applied for CPP-D almost 2 years ago and when I did it my LTD company made me sign the irrevocable form that allows Service Canada to send them the retroactive payment directly. I filled this out, signed it and sent it to my LTD company. They were supposed to fill out the bottom portion and then send it to Service Canada.

Flash forward and I got approved for LTD last month and was told I had almost $25,000 in retroactive payments I assumed would be paid out directly to my LTD company. Well, CPP deposited the entire amount into my bank account. Needless to say I was a bit shocked when I logged into my bank account and saw all that money.

CPP said they never got a revocable consent form and my LTD company case manager apparently forgot to send it. I haven’t heard anything from my LTD company yet. I think my case manager may have quit when he found out he made the mistake and I don’t know if he told anyone on his way out (doubtful). I feel like he hid the error and then quit and someone will discover it later.

How is this going to affect my taxes? If they ask for me to pay them the whole amount back, can I deny, and tell them to deduct it from my future payments? I am worried about how high my tax bill will be next year.

I was worried about taxes too but it worked out. I suggest you call service Canada and discuss your issue. Look up form T1198 on the website. It won’t be taxed as a lump sum, or at least it wasn’t in my case.
EQ bank has a 2 percent savings acct… Perhaps park the money there till you learn more. In many cases it seems Ltd gets the lump sum as well as deducts the ongoing amount from each month. Good luck

Btw, if you haven’t applied for the disability tax credit, do so

CPP will automatically adjust the income from CPP for the years that they should have been earned. So if you received a lump sum in 2020 for 2018 and 2019 then they will adjust those taxes for those years. Yes, will be a tax hit but may not thrust you over to higher tax brackets that way. Also LTD is supposed to then get that lump sum but then deduct proportionately the amount they would give you. The point is, you could let them ask for it but if/when they find out you will have to pay them back the lump sum and any current and future monthly cppd payments you receive. You could as someone suggested, just keep it in a savings account until they call for it or you can call them and disclose it. LTD can reduce your payments to spread out the amount owing for a few years. So for example, if you owe LTD $10,000 they could just reduce your LTD payment by spreading over the amount owed for 24 months. This would be $416 in the $10K case, plus then they reduce/offset the amount you get for cppd.

I am wondering if CRA will adjust not only CPPD retroactive lump sum payments, but also LTD if you have received both (ex - getting approved for CPPD retroactively for several years first, then later on being approved for those same years by LTD.) Would they adjust both according to the years they should pertain to? I would think so? :thinking:

We talked about CPP/LTD lump sum payments and how they are taxed a lot on the forum. You can use the Search option in the top right corner. There are lot of helpful posts.

If you have a low income most probably you won’t pay any taxes on CPP lump sum. Here’s our discussion:

There is more information on CRA’s website.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-11400-cpp-qpp-benefits.html

Hi Adam,

Have you seen our article on CPP Disability Tax Questions?


It should be helpful in your situation!