Retired teachers, are you ready for tax season?
April 05, 2014
For many, tax season is one of the most daunting times of the year. To make life a little easier, check out our Teachers' and Taxes tip sheet. We've also dispelled a few common myths related to taxes and your pension. Continue reading for a complete guide.
- Download your T4A, anytime, anywhere
You should have received your T4A in the mail at the end of January. It came in the same envelope as your deposit advice slip. If you need a duplicate, log in to iAccess Web, our secure member website. Visit the "Tax Slips" section under "My Pension", and download a duplicate copy.
- Splitting incomes
Do either you or your spouse have a higher retirement income than the other? Splitting your pension income may help reduce the amount of taxes owed by your household.
Pension income splitting occurs when couples file their annual tax returns. Under the rules, you can allocate up to one half of your retirement income to your spouse on your income tax return. It is particularly beneficial in cases where a spouse earns a much larger amount than his or her partner.
Finding the right balance is dependent on your personal situation. Visit the Canada Revenue Agency's (CRA) website to see if you qualify. If you do, consult a tax professional to find the optimal split for you and your spouse.
For more information, visit our Spousal Income Splitting resource page.
- Take it from the source
Do you end up owing money each time you file? If you have other sources of income, you may not be paying enough tax at the source, which could result in a hefty tax bill in the spring.
You can increase the amount of income tax taken at source each month from your pension to reduce the likelihood that you'll owe money when you file. Log in toiAccess Web visit the "Pension Statement" section under "My Pension". If you have already increased the amount of income tax taken at source, click, "Change Tax." If this is the first time you will be increasing the amount, click "Increase Tax." While there, change your income tax by increasing the dollar amount.
Have a tax-related question about your medical benefits? Contact your personal health plan directly:
- Ontario Teachers' Insurance Plan (OTIP) – 1-800-267-6847
- Johnson Inc. – 1-877-406-9007
Myth: Teachers' plan sponsors (the Ontario Teachers' Federation and Ontario government) determine the amount of tax that is deducted from my pension.
Fact: The basic deduction we apply is based on the CRA requirements and the information we have regarding your income.
When calculating your deductions, we assume that your Teachers' pension is your only source of income and that you only qualify for the Basic Personal Exemption, unless you tell us otherwise (by submitting a TD1). Government tax tables can change as often as every six months. If a change affects your pension, we will notify you.
Myth: Couples who split a pension income should always split it 50-50.
Fact: The optimal split in pension requires tax software or some old-fashioned trial and error, and a 50 per cent split is not always the best solution.
Visit the CRA's website to see if you qualify. If you do, consult a tax professional to find the optimal split for you and your spouse.
Myth: Teachers' can reduce a pensioner's ongoing tax deduction if they are income splitting with their spouse.
Fact: In prior years, you may have received a tax refund as a result of splitting your pension income with your spouse. We're often asked to reduce the amount of tax withheld at source. Unfortunately, government legislation does not allow us to do this. We are required to deduct tax based on 100% of your monthly pension payment.
You and your partner must make a joint election on the tax form Joint Election to Split Pension Income (Form T1032). Only one joint election can be made in a tax year. In other words, if both you and your spouse have eligible pension income, only one of you can split your pension income.
If you are filing electronically, keep this form in case the CRA asks to see it. If you are filing a paper return, Form T1032 must be completed, signed and copies attached to both your and your partner's returns. The information on the forms must be the same.