Hi, I have been on LTD through my insurance Manulife. I was urged to apply for CPP disability. Which I did and was approved. Manulife received a large sum of retroactive payment, NOT me, BUT, the T4AP was sent to me, in my name. So, this shows I made $23,000.00 more than I actually did (gross/in bank/in pocket). I spoke to CRA and they said I need to fill in line 22900 that’s amount to offset the amount ( I can not find this line while doing my online taxes). I am using wealth simple and tried to get help from their services, they don’t understand or know what to do, more so because they don’t understand the situation. Ultimately, what’s happening, is this is showing as my income and now I’m owing over $5,000.00 in taxes! This is NOT ok in my books and how does it makes sense that CRA send money directly to Manulife but T4AP to me?? Seems super sketchy.
I should note, Manulife will provide a “credit letter”, but this does not resolve my issues with filing my taxes and showing I earned almost double my income, which I did not.
Sorry, I think it has to be on the correct line on income tax form. The payment to insurance company is NOT expenses for income, which I believe is the form to which @meow refers.
Unfortunately I believe that the only relief is if you received a back payment for multiple years then you can get the CPPD lump sum split between those tax years. That might lower the tax if some of those years were very low income. Otherwise we’re kind of screwed by the replacement of non-taxable income by taxable income. At least it will help you get more CPP when you reach retirement age…
You will need to paper file your return. Write letter along with your return enclosing copy of letter from cppd showing the breakdown for each year the lump sum applied to and ask cra to apply those amounts to the years they would have been received. I had a tax balance for 2023 owing of almost 10k and once the years for payments were correctly applied my balance was zero. Here is the cra site explaining in more detail.
You need to get the details of the retroactive years they’re applicable for. I had to call CRA for an explanation but eventually you get a letter with the years broken down. Then you can apply the amounts to the right yearsvand amend your taxes for each year. Unfortunately, yes… You will be paying taxes on that amount. I suspect you’re like me where my LTD is tax free but once they offset some of your payments to CPPD, that amount IS taxable income. If you apply for and get DTC, it will help reduce those taxes.
@HereFishie@Caro sorry for jumping in, I thought a retroactive payment for CPP-D in the form of a lump sum only covers up to 12 months before the date the application was received, plus the months from the application date to the approval date? Just trying to learn about this all myself.
Yes that’s my understanding as well. Normally it would only cover 2 tax years but with how slow the applications are getting and how long appeals are taking it might become more common to extend to 3 years.
@Caro Thanks for the explanation and @HereFishie thanks for sharing your experience. That’s good to know. It would go to my insurance company anyway, so I am actually hoping I have less retroactive payment so I have less income that’s taxed.
My understanding is that you report this at 23200 as “income amount repaid”. I cover this at page 94-97 of my book: The Beginner’s Guide to CPP Disability.
David Brannen
Disability Lawyer with Resolute Legal
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