I received a severance as a retiring allowance and tax was deducted. I have not received a T4, not sure what to do. Does this count as employment income

You must pay income tax on severance pay. How much tax you pay depends in part on how your employer pays your severance pay. For example, you may pay less tax if you get your severance pay as a salary continuance instead of as a lump-sum payment. Tax will not be withheld from the part of your retiring allowance that your employer transfers directly to your RRSP, RPP, PRPP, or your SPP. Tax will be withheld from the portion of your retiring allowance that is not transferred directly to your RRSP, RPP, PRPP, or your SPP by your employer.

If your employer has deducted taxes then request them to issue an amended T4. If your employer refuses — or is unable — to provide an amended T4 slip, keep copies of your communication, and file your tax return with the correct information, including how much you really earned, and how much was deducted at source, as calculated from your pay stubs. Because the CRA’s computers are likely to detect a mismatch, you might be audited. If you get an audit letter in the mail, provide copies of your pay stubs and copies of your communication with your employer, and explain to the CRA, in writing, what happened. From your records, it should be clear how much you earned and how much was paid by your employer for your income tax and benefits.

If your employer took source deductions from your salary and just never remitted them to the government, in general the CRA may audit your employer. The CRA recommends keeping all of your tax documents, especially pay stubs and proof of deposit, for at least six years from the time you file your income tax.

If you didn’t get an audit letter, but – surprise! – a Notice of Assessment shows up in the mail demanding that you pay the difference between the amount documented on your T4 as deducted at source and the real amount, you have 90 days to file a Notice of Objection to fight the reassessment. A Notice of Objection is a way of telling the CRA that you disagree with the assessment and want to show reasons why it is wrong and should be replaced. You will need to show the same information as suggested above – how much you actually earned, via deposits and pay stubs, and, if possible, proof that you told your employer about the problem. As with any tax dispute, it may be a good idea to consult a professional with tax experience, such as an accountant or a tax lawyer.