Qualifying Retroactive Lum Sum Payments -
Federal
A ''Qualifying Retroactive lump sum payment'' is
a lump sum that is paid to an individual (other than a trust) in a
year and that relates to one or more prior eligible taxation years
during which the individual was a resident of Canada throughout the
year.
The CRA will not change the previous years' returns to include
this income. However, the CRA may calculate the tax payable on the
parts of the payment relating to previous years as if you received
them during those years.
The income received on form T1198 - "Qualifying retroactive
lump sum payment" must be included on slips T4, T4A or T4E of
the beneficiary and included in the tax return.
If the total of all principal amounts that relate to prior
years on form T1198 is $ 3,000 or more, this will make the
return ineligible for federal NETFILE or EFILE. Therefore, the
T1198 form must be signed by the payer, and then annexed to the tax
return and you must mail your federal form T1198 and the tax
returns.
If the amount is less than $ 3,000, the NETFILE restriction is
lifted, but the T1198 form is generated for informational purposes
only, and not transmitted with the return.
You must also declare the income received on a T4, T4A, or T4E
information slip.
For more information on this topic, please see the following
links CRA:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/qualifying-retroactive-lump-payments.html
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1198.html
In the case of a T4, T4E or a T4A you have the amount paid
relating to several previous tax years. To report these amounts,
please follow these steps:
1- On the "Left side menu on the «Interview tab",
select the "T4 and employment income" and on the page to the
right select "T4 income earned outside Quebec". For
residents of Quebec, choose "T4 and RL-1 (Relevé 1) income
earned in Quebec whit QPP contributions" if the amounts are on
a T4 or a T4E.
If the amounts are on a T4A, select the option ''T4A -
Pension, retirement, annuity and other income ''.
2- Return to the "Left side menu on the Interview tab"
and select the item "Other income" and on the right choose
"T1198 - Qualifying retroactive lump-sum payment".
3- Enter a brief description for the line "Description of
QRLSP (Form T1198)".
4- On the line" Interest (current and prior years)",
enter the amount of interest (if applicable).
5- Then, enter the principal amount relating to each
applicable year.
Note: For residents of Quebec, you must also
complete Form TP-766.2 if it was not completed by the payer. To
access this form, return to the ''Left side menu on the
Interview tab'' and select ''Other income''. On the page
that appears on the right select the option ''TP-766.2 -
Information about the amounts received as a retroactive payment, as
support-payment arrears or as a repayment of support''.
ID: 20201209155028NA.xml
Webpage: KPA310-20201209155028NA.htm
