Overpayments and options to repay them
This page provides information about overpayments and the new flexible repayment options available to you.
On this page
- Meaning of the term “overpayment”
- Overpayments received in the current tax year
- Overpayments received in a previous tax year
- Repayment options if you have an overpayment
- Get information about your overpayment
- Repayment schedule
- How to repay the full amount of your overpayment
- Related links
Meaning of the term “overpayment”
An overpayment is an amount of money paid to an employee to which they are not entitled. The following situations are examples of overpayments:
- An employee is (or was) on Leave without pay (LWOP) and continued to receive their pay
- An employee’s acting pay did not stop when their acting assignment ended
- An employee received an allowance that they were not entitled to
Overpayments received in the current tax year
If you received an overpayment and it has been recorded in Phoenix in the same tax year, or recorded in Phoenix during the following tax year, and before your original tax slip(s) are produced, your tax slip(s) and earnings for that year will not include the overpaid amount.
If the overpayment is recorded in the following tax year but your original tax slip(s) have already been produced for that year, then your employer will automatically amend your tax slip(s) and submit the amended T4 to the Canada Revenue Agency, and, if applicable a Relevé 1, to Revenu Québec, who will automatically reassess your tax situation.
Overpayments received in a previous tax year
Within the past 3 years
Under the tax legislation implemented on January 15, 2019, by the Department of Finance Canada, your employer can adjust certain tax withholdings at source to reduce the overpayment amount if the overpayment is recorded in Phoenix within the 3 calendar years following the year during which the overpaid funds were received.
Once your overpayment is recorded in Phoenix, your tax slip will be amended to remove the overpayment amount and reflect the adjusted earnings. Original source tax deductions associated with the overpayment will be adjusted and the amended deduction amounts will be reported on the amended slip to be considered when your annual income tax return is reassessed. Your employer will submit the amended slip to CRA, and Revenu Québec if applicable, who will automatically reassess your tax situation and adjust your tax withholdings.
Outside the past 3 years
The tax legislation does not apply and your employer is required to deduct, and remit to the Receiver General, the appropriate tax withholdings on any salary and wages paid to you regardless of whether the amount was paid in error. Your employer remits the tax withholdings on your behalf and the amounts are credited for the calendar year in which you received the payment. Tax withholdings will be adjusted when you file your personal income tax return.
Once your overpayment is recorded in Phoenix, your tax slip will be amended to remove the overpayment amount and reflect the adjusted earnings. Original source tax deductions associated with the overpayment will be reported on the amended slip and will be considered when your annual income tax return is reassessed. You must request a reassessment of your tax situation by CRA, and Revenu Québec, if applicable; it is not done automatically. For more information, refer to Canada Revenue Agency: Frequently Asked Questions – 2021 Tax Implications of Phoenix payroll issues
Repayment options if you have an overpayment
Flexible measures have been put in place to help minimize financial hardships for employees for the repayment of overpayments related to Phoenix pay system issues. Employees with overpayments greater than 10% of their gross biweekly pay, eligible for flexibility measures, will receive a letter advising them of the amount owing, the cause of the overpayment, and the flexible repayment options available to them. Only if the employee returns the acknowledgement letter within the deadline specified in the overpayment letter and chooses to access the repayment flexibilities, recoveries of these amounts will start when:
- all the employee’s outstanding transactions have been addressed
- the employee has received 3 consecutive correct pay cheques
- a recovery agreement has been established
If the acknowledgement letter is not returned within the deadline specified in the overpayment letter, the recovery at the default rate will start immediately.
If you consider yourself to be in a financial hardship situation, and have already agreed to a repayment plan before the measures were put in place, you can ask for your repayment plan to be modified to benefit from these flexible options. This may be done by contacting your departmental delegated authority.
The Public Service Pay Centre is responsible for managing overpayment recoveries for when a department or agency is served by the Public Service Pay Centre. Employees must call the Client Contact Centre if they want more information on flexibilities.
For departments and agencies not served by the Public Service Pay Centre, overpayment recoveries are coordinated through departmental compensation services.
Flexible options for repayment of overpayments
Repayment options for overpayments, emergency salary advances and priority payments will be managed in the same way. Only if the employee returns the acknowledgement letter within the deadline specified in the overpayment letter and chooses to access the repayment flexibilities, recoveries of these amounts will start when:
- all the employee’s outstanding transactions have been addressed
- the employee has received 3 consecutive correct pay cheques
- a recovery agreement has been established
If the acknowledgement letter is not returned within the deadline specified in the overpayment letter, the recovery at the default rate will start immediately.
Exceptions to flexible repayment options
The flexible repayment measures do not apply to recoveries associated with terminations of employment or any end of term or casual contracts that are not extended or renewed. They also do not apply to the repayment of amounts owing that were the result of routine pay transactions, such as:
- overpayments of less than 10% of an employee’s gross bi-weekly pay
- overpayments resulting from past or late periods of leave without pay of 5 continuous days or less, for which the employee was already paid
- an administrative overpayment created as a result of the automated late acting process
- overdrawn leave (vacation/sick) upon termination of employment (for reasons other than incapacity/illness, death and layoff if applicable based on your collective agreement)
- cancellation of a leave with income averaging agreement by the employee, where the leave has been taken
- amounts advanced on behalf of the employee for union dues
- maternity/parental allowance, where the employee has not fulfilled their obligation as set out in their collective agreement or terms and conditions of employment
- deficiencies owed to public service health insurance plans, pension, supplementary death benefit or disability/long-term disability due to periods of leave without pay
Repayment process for employees on leave without pay
If you are on leave without pay more than 5 consecutive days, repayment of any amounts owed will only start when:
- you have returned to work
- all the transactions on your pay file have been completed
- you have received payments for 3 consecutive pay periods
- you have confirmed a recovery agreement
Repayment process for former employees
If you are a terminated employee, overpayments are recovered from first available funds on termination of your employment, as per the Directive on Terms and Conditions of Employment. If you still have an outstanding payment after all payments have been issued, you will receive a letter advising you of the outstanding amount. A personal cheque, money order or bank draft made payable to the Receiver General of Canada can be used to pay this amount.
Terminated employees who would like to verify if an overpayment is recorded in Phoenix or would like to arrange repayment are asked to call the Client Contact Centre at 1-855-686-4729.
Get information about your overpayment
If your department or agency is served by the Public Service Pay Centre:
- When overpayments are processed, the Public Service Pay Centre will send employees eligible for flexibility measures, a letter advising them of the amount owing, the cause of the overpayment and the flexible repayment options available to them.
- If the employee returns the acknowledgement letter within the deadline specified in the overpayment letter and chooses to access the repayment flexibilities, recoveries of the amount will start when all the outstanding transactions on the employee’s file have been addresses, the employee has received 3 consecutive correct pay cheques and a recovery agreement has been established.
- If the acknowledgement letter is not returned within the deadline specified in the overpayment letter, the recovery at the default rate will start immediately.
If your department or agency is not served by the Public Service Pay Centre, your departmental compensation services should provide you with the required information.
Repayment schedule
You will be provided all reasonable options in agreeing to a repayment timeframe and the amount you can pay on your bi-weekly pay cheque.
In general, repayment should be completed within 3 years of a plan being established, or earlier if you are leaving the government. After all termination payments have been issued, if you have outstanding overpayment balance you will be asked to pay the remaining balance by cheque, money order or bank draft.
How to repay the full amount of your overpayment
Once you have received the details of your overpayment amount, a personal cheque, money order, or bank draft made payable to the Receiver General of Canada may be sent to:
If your department or agency is served by the Public Service Pay Centre, you may send your payment along with a completed pay action request (PAR) form:
NOTE: Please refrain from inputting an existing case number on the PAR form
- Under section 2 (work type), select “Cheque”
- Under section 3 (sub type), select “Cash Payments” to:
Public Service Pay Centre Mail Facility
PO Box 6500
Matane QC G4W 0H6
If your department or agency is not served by the Public Service Pay Centre, follow your departmental procedures.
Related links
- Flexible recovery of overpayments, emergency salary advances and priority payments
- Canada Revenue Agency Frequently Asked Questions - 2021 Tax Implications of Phoenix payroll issues
- Claims for expenses and financial losses due to Phoenix: types of claims
- Contact information - Canada Revenue Agency
- Revenu Québec Contact Us
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