CPP problem

Zoomer | January 1st, 2006

Question: I am on Canada Pension and I got a T4 slip in the mail for about $25,000. My question is are they going to want 30% of that in taxes and if so why didn’t they tell me when they gave it to me and I would have paid it then? I am in trouble and need help!! – C.C.

Answer:

The $25,000 figure sounds high to me. The CPP payment last year for an individual who qualifies for the maximum amount and started collecting at age 65 was about $9,600 for the full year. So you should double-check that the figure on the T4 is correct.

Regardless of the actual amount, all Canada Pension Plan payments are taxable and must be included when you file your 2002 income tax return. The rate of tax you actually pay will be determined by your total income, the marginal tax bracket that puts you in, and your province of residence. In most provinces, you would need more than $30,000 in taxable income before you move into a 30% bracket (approximately).

No tax is normally deducted at source for CPP payments, however you can apply to have tax withheld voluntarily which will eliminate this type of unpleasant surprise in the future. <a href="http://www.ccra-adr.gc.ca/ewsroom/factsheets/2000/jan/sac_handout-e.html”>Here are details on how to do this.  As for payments already received, I’m afraid you have no choice but to pay Canada Customs and Revenue. – G.P.