Deduction of Income Tax at Source

Topic

Deduction of Income Tax at Source

Case number

• 2014-173 (F&R Date: 2014–12–08)

Description

The grievor elected to cash-out his Payment in Lieu (PIL) of the Canadian Forces Severance Pay (CFSP) prior to the 28 March 2013 deadline.  His Letter of Authority from the Canada Revenue Agency (CRA) to not withhold income tax at source in order to contribute the full amount to a Registered Retirement Savings Plan was submitted after the election deadline but before the payment was made.

The Committee determined that the regulatory deadline of 28 March 2013 for the election of the PIL did not apply to the administrative requirement for the Letter of Authority in order for the Canadian Armed Forces (CAF) to not withhold income tax. The Committee therefore concluded that the CAF inappropriately bound the non-taxation of the PIL to the receipt of a copy of the CRA Form T1213 submitted to the CRA or the CRA Letter of Authority by 28 March 2013.

As the file indicated that there were additional personnel within the grievor’s Formation who had the same issue of income tax being deducted in error, the Committee found that their situation should also be reviewed and fixed.

Recommendation

The Committee recommended that the CAF identify those members who had provided the CAF with a CRA Letter of Authority that their PIL was not to be taxed at source prior to the payment being effected but still had income tax withheld and that their situation be corrected.

Final Authority Decision

Case withdrawn at CDS Level.