Frequently asked questions: claims for impacts to income tax and government benefits

If you were underpaid in one year and received the amounts you were owed in a following year (for example, salary owed in 2016 that was paid in 2017), it’s possible that you paid more in income tax. It’s also possible that some of the government benefits and credits to which you are entitled were reduced or will be reduced.

We understand that you may want assistance to better understand the tax implications caused by the delays in receiving your pay. Consult the Canada Revenue Agency’s Frequently asked questions: 2018 tax implications of Phoenix payroll issues. Also read the answer to Question 14 below.

If you consult with an expert to sort out your income tax, the Government of Canada will reimburse expenses (up to $200 per year, taxes included) related to obtaining tax advice.

Although the Canada child benefit is usually the most significant benefit affected, there are other social benefits that could be affected by changes in family income:

• GST/HST credit
• child disability benefit
• working income tax benefit
• provincial and territorial benefits (administered by the Canada Revenue Agency (CRA), for example, the Ontario Trillium benefit)
• provincial and territorial benefits (not administered by CRA, for example, the Quebec daycare subsidy)

Send your claim to your departmental claims officer. Payments will be reimbursed through your department’s financial system, not Phoenix.

We will compare these two amounts:

• the income tax you actually paid in the calendar years that you were underpaid and overpaid
• the estimated taxes payable in those years as if your salary owed was paid in the correct calendar year rather than in the following year

If the difference between the two amounts is positive, the Government of Canada will reimburse you.

Some tax brackets are very large, so an increase in income would have to be substantial before an individual would start paying tax at a higher rate.

We will compare these two amounts:

• your estimated government benefits and credits for the year based on your modified^{Footnote 1} adjusted net family income from the previous calendar year^{Footnote 2}
• the government benefits and credits for the year that you actually received (as shown on your benefits statement)

If the difference between the two amounts is positive, the Government of Canada will pay you the difference.

If you were owed salary from 2016 or subsequent years and did not receive it until the following year, your income in the preceding year was lower than normal. Because your benefits were calculated based on your income in the preceding year, you would have received increased benefits. You are entitled to keep these.

When estimating your benefits, we assess what your benefits in the following year should have been if you received your salary in the correct calendar year.

When estimating your benefits, we assess what your benefits in the following year should have been if you received your salary in the correct calendar year.

Example

Your normal income is $65,000, and you were owed $10,000 from 2016 that was paid in 2017. Therefore your 2016 income was $55,000 and your 2017 income was $75,000.

• In 2016, when your income was $55,000, you received increased government benefits and credits. These are yours to keep.
• For 2017, we will “reduce” your income of $75,000 by $10,000 to remove the effect of the extra income from the salary that was owed from 2016. The income used to estimate your 2018 benefits is calculated as $65,000.

We will compare your estimated 2018 benefits, based on $65,000 income, with your actual 2018 benefits, which were calculated on income of $75,000, and pay you the difference. Here is an example follows:

For more information, please refer to Question 8a.

Yes. If you are unable to complete the table, provide us with the following:

• your pay stubs for payments you received for salary owed for one year but only paid in the following year
• as much other information as possible, such as notices of assessment from the Canada Revenue Agency

We will complete the table in the claim form for you. If there is any missing information, we will follow up with you or your department.

We will provide you with a detailed accounting of how we calculated the reimbursement or payment. This accounting will include a breakdown of the adjustments applied to each year to estimate the income taxes you would have paid if you had been paid in the correct year.

Yes. Any fees incurred would be included as part of the $200 maximum for the reimbursement for tax advice for 2016, 2017, or 2018.

No. Reimbursements for impacts to income taxes is not a taxable reimbursement.

Reimbursements related to government benefits and credits are considered taxable benefits. Accordingly, your reimbursement will be proportionally increased to offset this effect.

If you do not have access to your pay stubs, contact your departmental claims officer. In some cases, your department may not be able to retrieve your pay stub and you may need to obtain the pay stub directly from the pay centre. You can request your pay stub online or by calling 1‑855‑686‑4729.

Yes, you can submit your claims separately. Or, by checking the box in section 5 of the claim form, your claim will be automatically considered for reimbursement of reductions to government benefits and credits.

Note: You must submit your benefits statements, which are usually available in late June. You will also need to complete form TBS 330-0324E, which provides tax information on your family situation.

No. Payments from signing a new collective bargaining agreement are normal and can be expected every several years. Additional income tax payable from such payments is not eligible for reimbursement.

However, if your collective agreement implementation payment was due in 2017 but you did not receive it until 2018 (because of Phoenix issues), you may be eligible to submit a claim for impacts to income taxes or government benefits and credits.

No. The income tax and government benefit claim process is for employees who have received money that was earned and owed by to them through Phoenix in a preceding year. Accordingly, these claims can take into consideration only Phoenix-issued payments that can be supported by pay stubs. Payments made by Service Canada (or other third-party issuers) cannot be considered, as they are fall outside the purpose of this claims process.

We aim to process all claims within 60 calendar days of receipt.

Overpayments resulting from clerical, administrative or system errors are considered pay errors. Therefore, these overpayments should not be included in your income for the year. Once an overpayment is recorded in Phoenix, your annual earnings for the year are corrected.

If tax slips were already provided to you, amended tax slips will be generated by your employer and sent to the Canada Revenue Agency and Revenu Québec. Once the employee’s tax slips are amended, their income taxes and government benefit and credit entitlements will be recalculated automatically (the process generally takes 6 to 8 weeks).

Given that any overpayment issues that affect income taxes or government benefit entitlements are temporary and correctable, employees are not able to submit claims for overpayments.

However, if you are in temporary financial hardship because of an overpayment, you may be eligible to receive a recoverable advance until your pay situation is resolved.

For information about income tax and government benefit and credit implications of certain situations related to your 2016 personal income tax return, visit Frequently asked questions: 2016 tax implications of Phoenix payroll issues.

For information about income tax and government benefit and credit implications of certain situations related to your 2017 personal income tax return, visit Frequently asked questions: 2017 tax implications of Phoenix payroll issues.

You are encouraged to discuss your concerns with your departmental claims officer.

If you are still not satisfied with the decision concerning your claim, you have the right to grieve the decision in accordance with

• your collective agreement
• Public Service Labour Relations Act and its Regulations
• the Federal Public Sector Labour Relations Regulations