Tax season – Disability benefits and lump-sum reclassification payments are taxable income

Disability workers’ compensation, pension and lump-sum payments for a reclassification decision are generally considered taxable income.

This income is reported to the Canada Revenue Agency and must be declared when you file your taxes. Your employer, the pension centre, the workers’ compensation board, and the disability plan administrator will provide you with online tax statements. Most disability payments, including the Public Service Disability Plan, are taxable income.

It is important to review these payments carefully with your tax professional. If you have concerns about the amounts stated on these forms, you must contact the organization that provided the document. Your PIPSC compensation team does not have access to this information and cannot provide tax advice.

If you have received income from multiple sources – for example, from disability pay adjustments and retroactive payments because of a reclassification decision then you may receive amended tax forms at a later date. This is usually automatic. Often tax forms need to be reissued to reflect any corrections in amounts paid or the type of income. This might be the case for someone who completed a progressive return to work or who was accepted for workers’ compensation while also receiving disability payments. You may find it helpful to review your bank statements against the amounts reported on your tax forms to ensure any adjustments were properly reflected.

Your tax professional will be able to assist you with understanding the tax implications of these documents including tax credits for certain retroactive payments.

Members who experienced tax issues resulting from Phoenix will find additional information here