Frequently asked questions about claims for impacts to income tax and to government benefits
Employees who were underpaid in 2016 and whose pay situation was resolved in 2017 might have paid more income tax than usual in 2017 and received less in social benefits and credits, resulting in a permanent financial loss. Employees in unique situations who have incurred a permanent financial loss may also file a claim.
Q1. How do I know if I paid more in income taxes or if my government benefits and credits were reduced?
If you were underpaid in 2016 and received the amounts you were owed in 2017, it’s possible that you paid more in income taxes. It’s also possible some of the government benefits and credits to which you are entitled to in 2018 will be reduced.
We understand that you may want assistance to better understand the tax implications caused by the delays in receiving your pay. For additional information, please consult the Canada Revenue Agency’s frequently asked questions – 2016 Tax implications of Phoenix payroll issues and refer to question and answer 4.
If you opt to consult an expert in order to sort out your income tax, the Government of Canada, will reimburse expenses (up to $200, per year, with taxes included) related to obtaining tax advice.
Q2. What government benefits and credits could be impacted by my pay issue?
While the Canada child benefit is usually the most significant benefit affected, there are other social benefits possibly 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 Québec daycare subsidy)
We acknowledge that each person has a different financial situation. The impact to each of these social benefits and credits will be assessed on a case-by-case basis.
Q3. Where do I send my claim?
Since all claims are paid by individual departments, please send your claim to your departmental claims officer. The payments will be reimbursed through departmental financial systems, not Phoenix.
Q4. How will the impacts to my income taxes be calculated?
We will compare these two amounts:
- the income tax you actually paid in 2016 and 2017
- the estimated taxes payable in 2016 and 2017, as if your salary owed from 2016 was paid in 2016 rather than in 2017
If the difference between the two amounts is positive, the Government of Canada will reimburse you.
Example Total income taxes paid in 2016 and 2017 $25,000 Estimated taxes payable in 2016 and 2017, as if the salary owed from 2016 was paid in 2016 rather than in 2017 - $20,000 Amount to be reimbursed (if positive) = $5,000
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.
Q5. How will the reductions to my 2018 government benefits and credits, such as the Canada child benefit, be calculated?
The following two amounts will be compared:
- your estimated government benefits and credits for 2018 based on your modifiedFootnote 1 2017 adjusted net family incomeFootnote 2
- the 2018 government benefits and credits 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.
Example Estimated government benefits and credits for 2018 based on your modified 2017 adjusted net family income $5,000 Government benefits and credits for 2018 that you actually received (as shown on your benefit statement) - $4,000 Amount to be paid to you (if positive) = $1,000
Q5a. For impacts to government benefits and credits, such as the Canada child benefit, why aren’t you comparing the amount of benefits received in 2017 with the amount of benefits received in 2018?
If you were owed salary from 2016 and did not receive it until 2017, your 2016 income was lower than normal. Because your 2017 benefits were calculated based on your 2016 income, you would have received increased benefits. You are entitled to keep these.
When estimating your 2018 benefits, we assess what your 2018 benefits should have been if your 2017 income did not include the extra income from the salary that was owed from 2016.
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 (example follows).
Estimated 2018 benefits based on $65,000 income in 2017 $7,500 Actual 2018 benefits based on $75,000 income in 2017 - $6,000 Amount to be paid to you = $1,500
Q6. I’m unable to calculate the amounts to include in the table in section 3 of the claim form. Can I still submit my claim?
Yes. If you are unable to complete the table, please provide us with the following:
- your pay stubs for payments you received for salary earned in 2016
- 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.
Q7. I don’t have a lot of experience with income taxes, and these calculations are very complex. If you calculate my claim for me, how will I know whether the amount calculated for payment is correct?
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.
Q7a. Can I have the information validated by an accountant?
Yes. Any fees incurred would be included as part of the $200 maximum for the reimbursement for tax advice for 2017.
Q8. Do I pay income tax on reimbursements for impacts to income taxes that I receive?
No, reimbursements for impacts to income taxes is not a taxable reimbursement.
Q8a. Do I pay income tax on reimbursements for Government Benefits that I receive?
Reimbursements related to Government Benefits and credits are considered taxable benefits. Accordingly, your reimbursement will be proportionally increased to offset this effect.
Q9. I was underpaid from 2016 through 2017 and received my retroactive pay in 2018. Can I still submit a claim this year?
If you were owed salary from 2016 and you received payment only in 2018, then the impact will be to your 2018 income taxes and, if you are eligible, your 2019 government benefits and credits. You will be able to submit a claim after you have filed your 2018 income taxes in 2019 and, if you are eligible, after you have received your benefits statement(s) in 2019.
Q10. I do not have access to my online pay stubs. What should I do to make sure I am submitting my claim with all required documents?
If you do not have access to your 2017 pay stubs, contact your departmental claims officer for assistance. In some cases, your department may not be able to retrieve your paystub and you may need to obtain the paystub directly from the pay centre. You can request your pay stub online or by calling 1 855 686 4729.
Q11. Can I make separate claims for impacts to my 2017 income taxes and for the reduction to my 2018 government benefits and credits?
Yes, you can submit your claims separately. In addition, 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 information on your family situation.
Q12. My claim is for reimbursement of the cost of tax advice only. Is there a simple form I can use?
Yes. If you are filing a claim for reimbursement of the cost of tax advice only, use the form for the reimbursement for tax advice.
Q13. I received a large lump sum payment when my collective agreement was implemented, and I was taxed heavily on this amount. Can I claim taxes related to this payment?
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 are not eligible for reimbursement.
If your collective agreement implementation payment was due in 2017, but you did not receive it until 2018, you may be eligible to submit a claim for impacts to income taxes or government benefits and credits as part of the 2019 claims process.
Q14. I was on a long term leave in 2016 and received a large lump sum payment from Service Canada Employment Insurance in 2017. Can I include this amount in Section 3 (payments made to you in 2017) of my claim?
No. The income tax and government benefit claim process is intended for employees who have received money in 2017, which was respectively earned and owed by Phoenix in 2016. Accordingly, these claims can only take into consideration Phoenix-issued payments which can be presented with supporting paystubs. Payments made by Service Canada (or other third-party issuers) cannot be taken into consideration in the calculation as these amounts are outside the scope and mandate of this claims process.
Q15. I have already submitted a claim. When I can expect my reimbursement?
We aim to process all claims within 60 calendar days of receipt.
Q16. I was overpaid in 2016 or 2017. Can I also submit a claim for impacts to my 2017 income taxes or 2018 government benefits and credits?
We aim to process all claims within 60 calendar days of receipt.
Overpayments resulting from clerical, administrative or system errors are considered pay errors, and therefore 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 shared with 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 automatically recalculated (the process will generally take 6 to 8 weeks to complete).
Given that any overpayment issues affecting income taxes or government benefit entitlements are temporary and correctable, employees are not able to submit claims for overpayments.
However, if you are caught in temporary financial hardship because of an overpayment, you may be eligible for a recoverable advance to tide you over until your pay situation is resolved.
For information about income tax and/or government benefit and credit implications of certain situations related to your 2016 personal income tax return go to Frequently Asked questions - 2016 Tax Implications of Phoenix payroll issues.
For information about income tax and/or government benefit and credit implications of certain situations related to your 2017 personal income tax return go to Frequently Asked Questions – 2017 Tax Implications of Phoenix payroll issues.
Q17. What recourse do I have if my claim is denied or I do not agree with the decision?
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 either your collective agreement or the Public Service Labour Relations Act and its Regulations.
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