CPP exemption on Schedule 8 incorrect

[DJK1]

For a person who turned 60 in 2021 and collected CPP retirement pension for 4 months, the CPP exemption should be the full $3,500.  Schedule 8 Part 2 Box A shows 12 months for the exemption, which is correct.  However, the basic exemption is prorated so that the exemption is only provided for 8 months.

As noted by TurboTax user @gabetosello  2 years ago, this is not correct.  Schedule 8 lists the reasons for an exemption to be prorated, and it would not be prorated in this situation.  TurboTax is getting the # of months for the exemption by using 12 months less the T4A(P) # of months, and only providing an exemption for 8 months.  Again, as noted by the above TurboTax user, the problem can be remedied by changing the # of months on the T4A(P) to 12.  It can also be remedied by leaving the # of months on the T4A(P) blank.

This is the way it worked in tax years prior to 2012, when a person no longer contributed once receiving the pension.  It is not how it works now.

[TurboTaxBrenda1]

I just verified this- As per CRA-  If you started receiving CPP retirement benefits in 2021, your basic exemption may be prorated by the CRA. So yes, the basic exemption is prorated so that it is only provided for 8 months as the other 4 months you collected CCP retirement pension.

Thank you for choosing TurboTax. 

[DJK1]

Thanks Brenda, but it would only be prorated if the person elected to not contribute to CPP.  The person who brought this to my attention is only 60, so is too young to elect to stop contributing.  He also checked with CRA, who gave him the same answer as I gave him.  Unfortunately, CRA doesn't always give correct responses. The other occasion where it would be prorated is if the person turned 18 or 70 in the year.

See the examples at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-co..., in particular Example 3 which is for a person who is already collecting their pension and then elects to not contribute any more.

[TurboTaxBrenda1]

Here is a screenshot of the page and what it shows-

[DJK1 · Accepted solution]

Yes, but that only applies if you start receiving a CPP or QPP Disability pension during the year.  The # of months on the TurboTax Sch 8 is correct - it's 12, even if the person has only collected CPP retirement pension for 4 months of the year.  The exemption calculation in TurboTax is ignoring this.  See part 2 of Schedule 8, as well as Section 19 of the Canada Pension Plan Act (at https://laws-lois.justice.gc.ca/eng/acts/C-8/page-5.html#h-168214), for when it will not be 12 months:

[DJK1]

I just downloaded an update for TurboTax and I see this has now been corrected! Awesome.

[Lindros88]

My download from CRA shows no months for a 25 year old employee.  This causes no CPP deduction and all shown as CPP overpayment.  When I enter the 12 months it is right but will not allow me to efile due to the override.  

Any suggestions as I would like to efile

[TurboTaxBrenda1]

Did you happen to NetFile your return as of yet?