Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
New Member
posted Jan 23, 2020 11:24:55 AM

Can I Claim a Deduction to my Lump Sum Pension Payout Against my Income?

I recently quit a union job with a pension where it made sense to cash out my pension rather than let it mature. Before quitting I was on education leave where my pension contributions were deferred with the intention that when I come back to work I repay the back amount. I quit before this happened so when I cashed out my pension there was a deduction to my total payout that reflected the owed amount.

 

I just received my T4A forms for the pension payout and the payment amount in box 18 reflects the value before my deduction was taken.

 

I contacted my pension fund and they told me that the T4A must reflect the value of the pension they paid out, not the value minus the deduction. In rough numbers the gross value was ~$13,000.00 with a deduction of ~$3,000.00 pre-tax. But when they paid out my lump sum, the taxes taken at the time reflected the total after deduction. This has resulted in my owing the CRA a lot in taxes instead of getting a return.

 

My question then is, can I claim the deduction amount against my earned income? Either as a lump sum pension contribution or a reduction in income in the last year?

0 2 584
2 Replies
Moderator
Feb 10, 2020 1:16:19 PM

You should contact the CRA directly and check with them if there is a way for you to deduct his amount. If you are in Canada or the United States, you can call them at 1-800-959-8281. This page has more ways to contact the CRA: https://www.canada.ca/en/revenue-agency/corporate/contact-information/telephone-numbers.html

Level 15
Feb 10, 2020 5:07:24 PM

As TurboTax Susan said, you should contact CRA in regards to this. The following CRA newsletter has more information regarding claiming a deduction for this amount. 

 

To sum it up:

  • If you have not already received a deduction for the deferred contributions, you should be able to claim an amount as an "other deduction" on Line 23200 of your tax return. (For example,  you receive a T4 with an amount in Box 20 for these same contributions, you cannot claim it again as an "other deduction").
  • You'll need a letter from the Pension Plan Administrator.
  • You can ask CRA to approve the deduction prior to making the claim.

 

You'll find more information in this link: Newsletter no. 18-1, Repayments to Registered Pension Plans