To understand how Lump-Sum Payments work I recommend you read this excellent article from TurboTax: Lump-Sum Payments.
In Summary, all of these lump-sum payments are taxable, and your employer, plan administrator or whoever drafts the cheque should withhold income tax and remit it to the Canada Revenue Agency (CRA). However, the amount your employer withholds may not be your final tax rate. That will be determined when you file your income tax return and report all of your income and deductions. When you file this amount will be verified, but you are not be taxed twice. If you anticipate owing more tax than will be withheld using the recommended rates, you can notify your employer and ask him to adjust how much tax he withholds accordingly.
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