Reporting pension income
Pre-test question
Sorry, that is incorrect
Canada Pension Plan (CPP) and old age security (OAS) income are not eligible for pension income splitting.
That is correct
Canada Pension Plan (CPP) and old age security (OAS) income are not eligible for pension income splitting.
Instructions
- Open the tax software
- Review the Background information and Required slips (tax slips, receipts, etc.)
- Provide all required information for the appropriate sections of the tax software
- Once completed, compare your results with the solution provided
- Afterwards, refer to Key points of the tax software and the Takeaway points
Background information
Situation
Nadia is currently unemployed, has no income and is married to Alexei. Alexei is retired and receives income from the CPP, OAS, interest on their investments, and superannuation (registered pension plan).
| Category | Value |
|---|---|
| Name | Alexei Reznikov |
| Social insurance number (SIN) | 000 000 000 |
| Address | 123 Main Street City, Province X0X 0X0 |
| Date of birth (DOB) | October 2, 1959 |
| Marital status | Married to: Nadia Reznikov on July 23, 1983 SIN: 000 000 000 DOB: April 23, 1961 |
Required slips
T4A – Statement of Pension, Retirement, Annuity, and Other Income (for Alexei)
Text version of the above image
T4A – Statement of Pension, Retirement, Annuity, and Other Income
Protected B
Payer’s name: Bank of Canada
Recipient’s name and address:
Last name: Reznikov
First name: Alexei
123 Main Street
City, Province X0X 0X0
Box 012: Social insurance number: 000 000 000
Box 016: Pension or superannuation – line 11500: 23,709.56
Box 022: Income tax deducted – line 43700: 2,046.00
T4A(OAS) – Statement of Old Age Security (for Alexei)
Text version of the above image
T4A(OAS) – Statement of Old Age Security
Protected B
Issued by: Service Canada
Reznikov, Alexei
123 Main Street
City, Province X0X 0X0
Box 12: Social insurance number: 000 000 000
Box 18: Taxable pension paid: 6,778.44
Box 22: Income tax deducted: 0.00
T4A(P) – Statement of Canada Pension Plan Benefits (for Alexei)
Text version of the above image
T4A(P) – Statement of Canada Pension Plan Benefits
Protected B
Issued by: Service Canada
Reznikov, Alexei
123 Main Street
City, Province X0X 0X0
Box 12: Social insurance number: 000 000 000
Box 23: Number of months – retirement: 12
Box 22: Income tax deducted: 0.00
Box 14: Retirement benefit: 15,828.00
T5 – Statement of Investment Income (for Alexei)
Text version of the above image
T5 – Statement of Investment Income
Protected B
Recipient’s name (last name first) and address:
Reznikov, Alexei
123 Main Street
City, Province X0X 0X0
Payer’s name and address:
Bank 1
456 Main Street
City, Province X0X 0X0
Box 13: Interest from Canadian sources: 85.00
Box 22: Recipient identification number: 000000000
Review your results
Solution to Reporting pension income.
Key points of the tax software
Important note
To access complete instructions on the various steps of entering data into the software, click on the title of each section below.
Alexei's interview
- Click Spouse interview type in the left-side menu
- Select Complete information (recommended) from the What information will you provide for your spouse? drop-down menu
Pensions and saving plans - T4A, T4A(OAS), T4A(P)
- Click Interview setup in the left-side menu
- Tick the box next to Pension income, other income and split pension income, COVID-19 benefits (T4A, T4FHSA, T4A(OAS), T4A(P), T4-RCA, T4RSP, T4RIF, T1032) in the Pension and other income section
- Click T4A, T4FHSA and pension income in the left-side menu
- Click the + signs next to:
- T4A – Pension, retirement, annuity, and other income (COVID-19 benefits)
- T4A(OAS) – Old age security pension income
- T4A(P) – Statement of Canada or Québec pension plan benefits
- Enter the amounts for each tax slip into the corresponding fields
Interest and other investment income (T5)
- Click Interview setup in the left-side menu
- Tick the box next to Interest, investment income and carrying charges/interest expenses/CNIL (T3, T5, T4PS, T5008, RC359) in the Investment income and expenses section
- Click Interest, investment income and carrying charges in the left-side menu
- Click the + sign next to T5 – Investment income
- Enter the amounts from Alexei’s T5
Nadia's interview
- To complete Nadia’s Interview setup, ensure there are no boxes ticked in any section
Takeaway points
- Pension income splitting is a joint election that requires both spouses to prepare their tax returns at the same time
- The software automatically generates Form T1032, Joint Election to Split Pension Income, for each individual
- the couple must each receive a copy of the completed form and they must sign each copy, which they will keep for their records
- The amount in box 16 of Alexei’s T4A is eligible for the pension income splitting
- The elected split pension income amount transferred to Nadia is reported on line 11600 of her tax return
- the same amount is reported on line 21000 of Alexei’s tax return
- any income tax withheld from the eligible pension income (box 22 of the T4A) is split in the same proportion as that income and reported on line 43700 of her tax return
- Nadia can claim the pension income amount on line 31400 because the amount on line 11600 is considered a pension income
- Old age security payments are reported on line 11300 of the tax return and are not eligible for pension income splitting
- Canada Pension Plan payments are reported on line 11400 of the tax return and are not eligible for pension income splitting
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