# Tax problem with lump sum for Foreign Pension



## baywop (Mar 28, 2011)

My husband was employed in Ireland for 14 years and on returning to Canada qualified for a foreign pension on reaching retirement age. He first applied in 2004 but it was not until February 2009 that it was finalized and at that time he received a lump sum backdating four years from 2004-2008. 

This lump sum amount was declared on his 2009 income tax return and we have been trying to get this retroctive over a period of 4 years, rather 
than all in the one year but we are not having any success. It's been almost a year now and we are still not satisfied, we get a different answer 
each time, all stating we still owe them a balance. 

Our monthly income (CPP, OAS) has been drastically cut for the past year, and we have not been receiving any of the usual perks (quaterly tax credits, etc) all of which are being deducted to pay balance owed. We have been contacting them over the past few months explaining that we want it made retroactive but have received different answers (and different balances due) each time. 

I still feel there must be a way that this lump sum can be arranged over a period of 4 years rather than all in one year, and if someone here can 
give us some advice on if this is possible and what we should do next, it will be very much appreciated. 

I thank you in advance.


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## ghostryder (Apr 5, 2009)

baywop said:


> I still feel there must be a way that this lump sum can be arranged over a period of 4 years rather than all in one year, and if someone here can
> give us some advice on if this is possible and what we should do next,




There is none that I am aware of. 


If this payment qualifies under sec 110.2(2) as a "qualifying retroactive lump sum payment" it would not change the calculation of your line 236 income, which is the line that is used to calculate your eligibility for income tested benefits such as OAS or GST credit.

This section of the ITA would allow you to allocate portions of the lump sum to the years that they pertain to, but only for the purposes of calculating your tax payable on that lump sum. And you would probably need this form filled out by the payor of the pension http://www.cra-arc.gc.ca/E/pbg/tf/t1198/t1198-09e.pdf



BTW, CPP is not "cut" in anyway. What you get from CPP is entirely dependant on how much you put in. It is not income tested, nor is it ever "clawed back".


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## OhGreatGuru (May 24, 2009)

baywop said:


> ...
> This lump sum amount was declared on his 2009 income tax return ...
> 
> Our monthly income (CPP, OAS) has been drastically cut for the past year, and we have not been receiving any of the usual perks (quaterly tax credits, etc) all of which are being deducted to pay balance owed. ....


Your OAS payments for July 2010-June 2011 would have been automatically reduced based on your income for 2009. If you had reason to believe that your income for 2010 would be substantially lower than 2009, you could have filed a request that they base the clawback on your estimate for 2010 income instead. But now it's hardly worthwhile. If they clawed back too much you will get it back in this year's income tax refund.

_"..all of which are being deducted to pay balance owed." _ it sounds like you didn't pay what you owed in 2009, so you are paying it in quarterly instalments? I'm not quite sure how this should be affecting your "monthly income" since it should be coming out of the capital in the pension transfer - unless you spent it all?


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## baywop (Mar 28, 2011)

This section of the ITA would allow you to allocate portions of the lump sum to the years that they pertain to, but only for the purposes of calculating your tax payable on that lump sum. And you would probably need this form filled out by the payor of the pension http://www.cra-arc.gc.ca/E/pbg/tf/t1198/t1198-09e.pdf

** Thank you for this. We checked with our accountant who has been doing our tax return and he says that it appears that this form has been processed. 
Our return (2009) is still in progress so we will just continue to wait and see what happens.

BTW, CPP is not "cut" in anyway. What you get from CPP is entirely dependant on how much you put in. It is not income tested, nor is it ever "clawed back".[/QUOTE]

** Yes, sorry. I should have realized that.
Again, I thank you kindly for your information, for taking the time to help. We appreciate it very much.


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## baywop (Mar 28, 2011)

OhGreatGuru said:


> Your OAS payments for July 2010-June 2011 would have been automatically reduced based on your income for 2009. If you had reason to believe that your income for 2010 would be substantially lower than 2009, you could have filed a request that they base the clawback on your estimate for 2010 income instead. But now it's hardly worthwhile. If they clawed back too much you will get it back in this year's income tax refund.


** We were not aware of that, thank you very much. Our 2009 return is still being processed as we have been sending them information from time to time and each time the amount changes. We will just have to wait and see what happens once it's all sorted out.
We thank you for your help, appreciated very much.


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