Taxability of Phoenix damages: Victory for members across the country
February 23, 2024
In a victory for PSAC members impacted by the Phoenix pay fiasco, PSAC has secured an agreement with the Canada Revenue Agency to treat up to $1,500 of the Phoenix general damages compensation members received in 2021 as non-taxable.
Under the Phoenix damages agreement negotiated by PSAC in 2020, up to $2,500 in damages was awarded to members who suffered under the Phoenix pay system from 2016 to 2020. PSAC has long stressed that these damages should not have been taxed, and after lengthy deliberations and a Reference filed with the Tax Court of Canada, Canada Revenue Agency (CRA) has agreed that a majority of the damages – those specifically allocated to cover the pain and suffering experienced by workers – are not taxable. Revenu Québec is not a party to the settlement reached with CRA, but has already begun treating other Phoenix taxability objections similarly.
This decision means that members who file or have already filed a notice of objection regarding the taxation of Phoenix damages will be reimbursed the taxes that should not have been deducted from their damages payment in 2021. In the test case that PSAC brought to the Tax Court, Canada Revenue Agency provided a tax reimbursement of $492, but the amount will vary for individual members based on their location, income, and whether they received the full or partial Phoenix damages payment.
Over the past two years, PSAC has encouraged members to file a notice of objection, or an extension to file a notice of objection. If you did so already, no other action is required at this time.
All members who have not already filed a notice of objection must file an extension request and notice of objection by April 30, 2024 to be eligible for their Phoenix general damages compensation to be deemed non-taxable. Please share this information with your current colleagues as well as those who have retired since receiving the payment.
Please complete the steps outlined below as soon as possible to avoid missing the deadline.
How to be reimbursed taxes on Phoenix damages
Residents outside of Quebec
If you have not filed an objection with CRA regarding the tax treatment of any Phoenix damages you’ve received, you can still file a request for an extension of time to object and an individual objection regarding the taxability of the $1,500 portion of Phoenix damages for pain and suffering in your 2021 taxation year.
Should you instead wish to challenge the taxation of the remaining $1,000 for the late implementation of the 2014 collective agreement, you should seek independent tax advice to move forward.
You do not need to take any action if the following circumstances apply:
- You filed an individual objection with CRA to your 2021 tax assessment about the taxability of your Phoenix damages prior to April 30, 2023; or
- You filed an individual objection with CRA to your 2021 tax assessment about the taxability of your Phoenix damages and a request for an extension to object after April 30, 2023.
If the above circumstances do not apply to you, please follow the following steps as soon as possible and no later than April 30, 2024, to preserve your rights:
Option 1: If you have subscribed to CRA My Account for Individuals, you can choose to file your objection online by following the two following steps:
Step 1: select the “File a Formal Dispute” option on your personal CRA portal, where you can fill the appropriate information relating to your objection;
Step 2: once your formal dispute is recorded, the second step is to use the “Submit Documents” option to upload an extension request to accompany your objection.
DETAILED INSTRUCTIONS CAN BE FOUND HERE
Option 2: Alternatively, if you have not subscribed to CRA My Account for Individuals, you may choose to submit your objection by mail or fax.
Step 1: To do so, fill out a notice of objection and an extension request. Pre-populated forms and detailed instructions can be found here.
Step 2: Once the forms are printed and filled, you can choose to mail or fax them to the following address or fax numbers. We recommend you send your materials by registered mail to ensure they are received:
Appeals Intake Centre
Chief of Appeals
Appeals Intake Centre
1050 Notre Dame Avenue
Sudbury ON, P3A 5C1
Fax numbers:
705-670-6649 or 1-866-443-4955 (NL to ON)
604-587-2672 or 1-866-489-6832 (MB to BC and Territories)
Quebec residents: How to file a provincial and federal objection
Members who are Quebec tax residents must, in addition to their federal objection described above, also file a second objection with Revenu Québec – that is, Quebec members must file two separate objections, one with CRA and one with Revenu Québec.
If you have not filed an objection with Revenu Québec regarding the tax treatment of any damages you received, PSAC urges you to file: a request for an extension of time to object and an individual objection regarding the taxability of the $1,500 portion of Phoenix damages in your 2021 taxation year.
Should you instead wish to challenge the taxation of the remaining $1,000 for late implementation of the 2014 collective agreement, you should seek independent tax advice to move forward.
Residents of Quebec do not need to take any action with Revenu Québec if the following circumstances apply:
- You filed an individual objection with Revenu Québec to your 2021 tax assessment about the taxability of your Phoenix damages prior to April 30, 2023; or
- You filed an individual objection with Revenu Québec to your 2021 tax assessment about the taxability of your Phoenix damages and a request for an extension to object after April 30, 2023.
If the above circumstances do not apply to you, please follow the following steps as soon as possible and no later than April 30, 2024, to preserve your rights:
Unlike CRA, Revenu Québec does not accept online objections. You must choose between mailing or faxing your objection. To do so, you must fill out a notice of objection and an extension request.
PRE-POPULATED FORMS AND DETAILED INSTRUCTIONS CAN BE FOUND HERE
Once the forms are printed and filled, you can choose to mail or fax them to the following address or fax numbers. We recommend you send your materials by registered mail to ensure they are received:
Revenu Québec
3800, rue de Marly
C. P. 25025, succursale Terminus
Québec QC
G1A 0B8
Fax numbers:
418-577-5254 or 1-866-374-7286
Please note that Revenu Québec is not a party to the settlement reached with CRA, and did not commit to offer the same treatment to members who file valid notices of objection regarding the taxation of the Phoenix damages. However, Revenu Québec has already begun treating other Phoenix taxability objections similarly.