Is it "written law" somewhere that Manual Life "Must" withhold 20%....

Sorry, just had a thought. Currently, serving military members have the option of cashing out their severance pay which is subject to the withholding tax. If the member intends to put their money in an RRSP, the can complete a form T1213 Request to Reduce Tax Deductions at Source asking CRA for approval not to withhold tax on the requested amount. For Quebec residents, its form TP-1016-V, both are available on the CRA website. It takes 4 to 6 weeks to get a response from CRA, but when you do, you submit the approval letter to Manulife. This gives them authority not to withhold taxes on the approved amount. When you receive your retro payment, it is up to you to deposit the funds into an RRSP, Manulife cannot do this for you.

I am a currently serving RMS Clerk and have been administering these files at unit level. If someone told me that they were submitting the form T1213 to CRA, I put a note on the file going to Ottawa. Ottawa then holds the file until the approval letter comes in before paying out the severance pay. You may be able to do this with Manulife. It would possibly mean that you would have a delay getting your refund, but you'd have less tax withheld initially.

This is the only way I can think of to reduce taxes withheld. Not sure at this late hour if this applies if you have already received your refund. You would have to call CRA to find out.

Sabrelove (good night)

From the CRA website, here is what is published about withholding rates for lum-sum payments.

"Withholding rates for lump-sum payments

Combine all lump-sum payments that have been or are expected to be paid in the calendar year when determining the composite rate to use.

Use these federal and provincial or territorial composite rates:

- 10% (5% for Quebec) on amounts up to and including $5,000;
- 20% (10% for Quebec) on amounts over $5,000 up to and including $15,000; and
- 30% (15% for Quebec) on amounts over $15,000.

Recipients and employees may have to pay additional tax on these amounts when they file their returns. To avoid this, if a recipient or an employee requests it, you can deduct more tax:

- calculate the annual tax to deduct from the recipient's or the employee's yearly remuneration, including the lump-sum payment (see "Step by step calculation of tax deductions" in Part A of the T4032, Payroll Deductions Tables);
- calculate the annual tax to deduct from the recipient's or the employee's yearly remuneration, not including the lump-sum payment; and
- subtract the second amount from the first amount.

The result is the amount you deduct from the lump-sum payment, if the recipient requests it."

Here is the link to check it out yourself.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/lmpsm/wthhldng-eng.html

So CRA gives us the option of having more withheld, not less. This rule also applied to the severance pay on release if you didn't transfer it to a RRSP. Don't see much wiggle room on reducing this.

Also, be careful when you get your taxes done at places like H&R Block. I had a friend that worked at a tax preparation company and he told me that they hire additional staff during tax season. While they have a course in tax prep, they may not be experienced in all aspects of tax law until they encounter it and look it up. He was frustrated when hearing advise like this being given to clients when he knew it to be wrong. He advised to insist that they show you the regulations pertaining to deductions out of the ordinary so that you don't end up paying back taxes due to an error. Even if they make the error, you still owe the tax.

Sabrelove

A good question to send to the law firm.

I mean, if you really think about it, 20% from every claim withheld earning interest for gov't? Holy crap, at this rate, they will walk away breaking even.

the reason I asked was I was in to H&R Block today to do my taxes (I get the student rate) Anyway I asked one of the "tax specialists!? " about the retro and he asked why Manual Life was withholding 20%. He said as long as I declare my income when doing my 2013 taxes, the 20% would better serve me collecting interest for me rather than the gov't from now until 31 Dec 2013. The guy had a client waiting so I wasn't able to press him for further info. Anybody know if we can "legally request" individually, that the 20% NOT be withheld? It may very well say it somewhere but I wouldn't have the foggiest where to look.