Received the severance in February of 2017. Put all of the severance in an RRSP, and claimed that in 2016. In 2016 there was no box 67. I took the deduction. Now they have said I have to claim it as income and owe then a lot of money. I want to know if they are right, and why am I going to be taxed twice. Why put anything in to an RRSP.
Did you get an amended T4 - or on your T4 for 2017 was there an amount in box 67?
If you haven't paid taxes on the severance amount, you won't be getting taxed twice. RRSP is a tax deferral vehicle, not tax mitigation. By putting money into your RRSP in 2016, you lowered the amount of taxes owed in 2016. Where the money came from is irrelevant. The issue of paying taxes on your severance is a completely separate issue. Simply putting that money into an RRSP doesn't make it tax free. You still have to pay taxes on it, then your income will be reduced by that amount when filing.