SISIP/RETRO/TAX/SLIPS

Yes LTD4me, well put, I am aware of the notional interest, as I acknowledge this in the pass.
However like you have stated some may take this to be some sort of penalty placed on them.
What I was trying to point out is that does it really matter if they decide to put in place this notional interest,
sure you may not end up benefiting from your T1198 because of it, but one thing that is crystal clear, you will not have to pay any extra tax if found not to benefit from it.
This is my problem, I do not want individuals thinking that they are being screwed here with this T1198, this T1198 is a tool provided to us for the reason of trying to lesson some of the tax paid for claiming it all for the full year.
If it turns out not to benefit you, so be it, at least we are given the chance, without it we have no chance.
My advice would be to send in your T1198, but don't count on it, like I have stated before, you will either benefit from it, or you won't benefit from it.
Just be thankful that we are getting the chance, I know I am.

The most important thing in this whole tax ordeal is, we are not being charged any penalties on our 2013 tax return which includes our retro.

ltd another couple of great explanations I agree about the wording as well I try to never use the words tax penalties even though they feel like it as tax penalties are in the tax code and are a different animal than deemed tax. yup I like to use the term deemed tax as its easier but notional amount of interest ore the interest portion of the QRLSP calculation are just as good. as far as the tax payer relief goes they also can be for delays ore mistakes by the CRA ( not the GOC ) also the deemed tax are not penalties ore are considered interest by the ITA LMFAO. yup that's right it looks like interest its applied like interest and its applied in a compounded nature just like interest but man it aint interest. I mean wholly frack. soo its unlikely to have much success under this CURRENT legislation. but who knows things may change.

propat

Another point is that yes the minister can waive penalties or interest like he publicly stated he would for Ontario, Quebec and Atlantic Canada residents, because of power outages and peoples possible inability to file there taxes on time, but still no word on waiving our deemed interest good for those people but ha ha still what a joke for us and our deemed tax.Under the taxpayer relief provisions, taxpayers across Canada can apply to the CRA to have interest or penalties or both waived or cancelled when they are unable to file returns or make payments on time because of circumstances beyond their control, including a natural disaster. The CRA considers these requests on a case-by-case basis.

http://news.gc.ca/web/article-en.do?nid=808619

Robbie, if your getting a T1198 which it looks like you should, then it would be in your best interest to submit it along with your completed income tax filing for 2013, you will not pay any more tax if it is submitted, by saying "you will not pay any more tax" i mean if when you submit the T1198 and CRA does their calculations and if they determine that by spreading your retro over the years is going to cost you more in taxs then they will only charge you the lower taxes as if you claimed your retro all in one year (2013) but it could very possibly work out that when CRA does their calculations you might be better off tax wise by using the T1198 and spreading your income over past years, if you had a low income like in the lowest tax bracket and with the retro added to this income still keeps you in the lowest tax bracket you could very well benefit from the T1198.

Trooper, you are correct when you said "There for using words like TAX PENALTIES when explaining the way in which the CRA will do our calculations using the T1198 is in no way justified, and it certainly is misleading" ..........BUT,.... even though using the word TAX PENALTIES when CRA calculates our retro using the T1198 would be incorrect, one has to realize that when CRA does these retro calculations spread over the years there WILL, more than likely be an added amount to the calculation which CRA calls notional interest, which is their way of getting interest on money they should have got back when it was supposed to have been paid. CRA states in the tax act that this notional interest is not to be considered a penalty or interest but a notional tax calculation used when completing all qualifying retro lump sum payments in the years they should have been paid, hence that is why we were issued T1198's. So to sum up, there is no "tax penalty" per say, added to the amount CRA calculates when calculating taxes spread over the years but yes there is a notional interest added to the calculations when calculating taxes spread over the years. CRA does impose tax penalties in some cases, for example when people hide income like out of country investments. The thing with this notional interest is that most people feel it is a form of a "penalty", because we did not have the retro in the years we should have paid taxes on it, so why should we have to pay the CRA interest, another good point is they had our money all these years and would have already been getting a lot more interest on that full retro than if we had of paid the tax on the retro, just my opinion!!!!

bigrex yup the minister can choose to not apply deemed tax in our case but very unlikely. they can accept our request for taxpayer relief forms a little more likelier but still unlikely.

I brought this up prior to negotiations so people would know what is at stake but no one wanted to believe save fore maybe call of duty and a couple of others.

then again after the deal before we needed to wright the judge so people would know what the deal actually was but with the same effect.

both parties knew this effect when negotiating.

they gave us 2.37% to offset this effect witch only offsets for someone where only one tax year the most recent one has deemed tax applied.

for these reasons I think deemed tax will be applied as it was part of there strategy all along.

propat

nav not that confusing if by the addition of the retro brings a tax bracket up then you are taxed at that rate then deemed tax is added. keep in mind your income is taxed incrementally not as a whole. ie; if an additional 20000 brings you up one tax bracket by 10000 then the first 10000 is taxed at the old rate and the next 10000 is taxed at the higher rate. another way to look at it is any given tax year retro ore not if 40000 brings you to the next bracket and you have 60000 taxable income 40000 is charged at the low rate and 20000 is charged at the higher rate.

hope this helps

propat

tax penalties are for people who avoid paying tax.

the only way to pay deemed tax witch is a lower rate than penalties is to have a valid 1198 submitted .

deemed tax id payed by those who failed to pay past years tax through no fault of their own.

Robbie pleas fill out the 1198 just in case but this is unlikely to help you sorry buds. you will probably be taking the hit all in one year.

deemed tax is the average 90 day bond rate for the year in question plus 2% applied in a compounded nature.

ltd great explanation thanks.

propat

Trooper, tax penalties written in to the income tax act. They're not called penalties, but they are penalties all the same. They are designed to penalize taxpayers who intentionally hide income, and the longer they hide the income, the higher the penalties. Like someone else pointed, it is likely the compound interest that the money would have collected, if it had been had been sitting in a government account. One would hope that the CRA is aware of the lawsuit, and what it represented, and would not apply these penalties on this money, but I am not going to assume they will not.

Well troops the only thing I will ask is, in my case (MY CASE) lol since I averaged only between 21000 and 23000 a year since 03 will I stand a better chance at spreading over the retro period or taking the one time hit. No other income source, no rrsps, no cppd or dtc just my CFSA pension, you are all intelligent and by knowing I was zero summed back to 2003 you pretty much know my retro lol, so throw the ole boy a bone will ya. and to LTD4me your a damn fine soldier and to trooper go on ya brother thanks all for the info, PS still waiting for my 1198

Thank you, there actually was a guy in tears over this. He made no money and thought he was not going to beagle to use those past deductions already on his previous tax returns, very confusing. I think of the deemed tax as a interest penalty but it must exist in some form

LTD4me, thanks for taking the time to post this most informative info.

My following comments are not directed towards your post in general. My comments will deal with two words ( TAX PENALTIES )

You have completed your taxes and claimed all of your income for 2013, and you owe $100000.
You pay the CRA $100000, now you are done, and this was accomplished with no TAX PENALTIES.

When filing your taxes you have submitted form T1198.
The CRA has completed their calculations as you would had received your retro in those past years.
By doing these calculations the CRA has found that you owe and extra $80000.
Now here is where the confusion lies with respect to the words TAX PENALTIES comes into play.
If the CRA submits a request to you that you now owe that extra $80000, that would be complete justification in stating that TAX PENALTIES do exist with respect to our retro received.

However as we all know that they will not submit such a request, as that is not what the T1198 was designed for.
Therefor using words like TAX PENALTIES when explaining the way in which the CRA will do our calculations using the T1198 is in no way justified, and it certainly is misleading.

The only two things that we should be concerned about when submitting our T1198 is that, we will either benefit from it, or we won't benefit from it

If you use the retro calculation in the year it was received, then your retro amount for that particular year would be added to that same years declared income, which would then make a new yearly income for that year. For example, if you declared $15,000 income on your original 1999 income tax and your t1198 indicates a retro refund for 1999 of 15,000 then your new total income for 1999 would be $30,000. Then CRA would recalculate the new total tax owed for 1999 and that would be what you would owe, minus what you had already paid in taxes back in 1999. CRA will use any deductions that you had original used for that year ie: rrsp's or dtc etc...... but they will not allow any new or adjusted deductions. This is where a lot of people are getting confused, there is NO NO NO NO tax penalty (whatever you wish to call it) applied if you calculate your retro as received all in 2013, which we all have to do first. The notional tax (notional interest, deemed tax, penalty, interest or what ever you like to call it) ONLY ONLY ONLY and ONLY comes into play when you claim your retro spread over the years in which you should have actually received it, and then it really only comes into play, i believe from approx 2011 back. This notional interest (which CRA states is not to be considered interest but really is, a duck is a duck is a duck) is added to the actual tax you would have paid in that particular year. for example after CRA does the recalculation of tax including the retro you received  in 1999 and you owed a total of $1000 in regular tax and they calculated that the notional interest was $1500 (just a random figure i used) then the new total tax for 1999 would be the $1000 plus the $1500 equalling a total for 1999 of $2500. There is a formula used to calculate this notional interest and the percentage owed gets higher the further back you go in years actually in some cases it is very possible you could owe more in notional tax than you owed in regular tax as in the previous example.. It is STILL not clear that this notional interest is not going to be applied when cra does their calculations based on our submitted T1198's. Either way after CRA does their own calculations (which will only be done if you provide a T1198) we will only be taxed on the lower taxed value of either the retro all claimed in 2013 or all claimed spread over the past years. If anyone submits a T1198 form, it would still be in their best interest to submit a RC4288 E (Request for taxpayer relief) form which "might" and i use that term lightly be useful in having the additional notional interest not applied when CRA does their calculations based on the provided T1198, that is of course if CRA is going to apply the notional interest in the first place, which in my opinion has NOT been proven one way or the other. At the very least submitting the RC4288  form will be a way of releasing some very built up frustration over the the unfairness of this notional interest. Feel free to bash away I have big shoulders........

ok when you do your tax they don't apply deemed tax you only do it for 2013 that's it period. when CRA gets your taxes and 1198 they calculate your 2013 with all retro on that year.

then they do your calculations with your retro going back in the years and apply deemed tax to them.

whichever is best for you is what they use.

NO when you do your tax it is only done for 2013 so no deemed tax is applied as you are taking the hit all in one year if they do the QRLSP calculations WITH DEEMED TAX INCLUDED (ore penalties if that's what you want to call them) and you will benefit from this you will pay that deemed tax!

propat

 

Thanks, I am wondering for other people that did have income they must go back and add that retro amount each year to come to a proper tax rate, say one year you had 80000 income and 30000 retro, would not that retro be taxed as if you made 110000 that year. In the case of fairness one person could have had zero income that year and his retro was 30000 he would be taxed at 15 percent but the guy who also had 30000 in retro and also had 80000 income that year couldn't possibly be taxed at 15 percent because its supposed to be taxed as if you had received it in that year so his tax rate would be 29 percent?? confusing