Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
February 26, 2001
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your correspondence of January 9, 2001, seeking direction on filing an appeal against the decision of the XXXXXXXXXX to deduct withholding tax from a settlement you received from that department.
On XXXXXXXXXX, you received a payment of $XXXXXXXXXX and notification that a deduction of $XXXXXXXXXX had been made for federal taxes. The gross amount of $XXXXXXXXXX was identified as a retiring allowance by your former employer, the XXXXXXXXXX. A retiring allowance is taxable, and the payer of such an amount is required to withhold a prescribed amount on account of the recipient's taxes. You disagree that the amount is taxable, and you wish to appeal the decision to withhold tax.
The Income Tax Act provides that when an amount has been deducted or withheld from a payment, it is deemed to have been received at that time by the person to whom the payment was made. Also under the Act, no action lies against any person for deducting or withholding any sum of money in compliance or intended compliance with the Act. Accordingly, there is no appeal process in place to deal with your contention that no tax deduction should have been withheld from the payment you received.
In due course, you should receive a T4A information slip showing the gross amount of the settlement with the taxes that were withheld and credited to your income tax account. Any tax deductions exceeding your assessed tax payable will be refunded to you. If you object to the tax assessed, you may file a notice of objection in writing, setting out the reasons for the objection and all relevant facts. The filing of such a notice is the first step to initiate proceeding in the Tax Court of Canada.
The T4A information slip should be attached to your 2000 income tax return to obtain credit for the income tax withheld. Since your position is that the amount of $XXXXXXXXXX you received from your previous employer is non-taxable, you should report your income accordingly. Your income tax return should contain a full explanation on why you consider the amount non-taxable.
I trust my comments will be of assistance.
Yours sincerely,
Bill McCloskey Assistant Commissioner Policy and Legislation Branch