Tax headaches expected from payroll fiasco
Public servants with pay problems will have to do own calculations and carefully check T4s
With the new year on the way, many federal public servants who are still caught in the midst of the Phoenix payroll fiasco are worried and confused about filing their taxes.
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Global Affairs policy analyst Jonathan Chambers said his pay problems started in January — and he's now owed more than $16,000. And he's not alone.
Tens of thousands of bureaucrats have been overpaid and underpaid since the federal government launched the Phoenix pay system earlier this year.
"My first problem was that I didn't get paid at all for the work that I was doing from January to mid-February," said Chambers, who said he's still only getting paid about half of what he should be making.
Chambers is worried that if he's not paid what he's owed by December 31, then gets the lump sum reimbursed, there will be an impact on his 2017 taxes. He said he hasn't been able to get straight, easy answers when he's called Public Services and Procurement Canada or the Canada Revenue Agency.
CRA 'prepared' for Phoenix-related tax issues
CRA director general Randy Hewlett said he wants to reassure public servants that these types of situations are not complicated.
Marie Lemay, the deputy minister of Public Services and Procurement Canada, recently told the media that the government is aware that workers are concerned about the tax problems created by Phoenix.
"We have been working very hard. We've worked with the Revenue Canada agency to minimize potential problems and provide the information they need," said Lemay.
According to the frequently asked questions about Phoenix on the CRA website, "if an amount is owed to you in 2016, but is only paid to you in 2017, that payment will be reported on your 2017 T4 even though it was owed for 2016."
In Chambers' case, he will likely pay lower income taxes than usual in 2016 — and higher income taxes than usual in 2017.
That means Chambers, and others like him, will likely be in a higher tax bracket when he is finally paid what he is owed.
Financial decisions delayed
"Until it gets resolved, it's going to be hard to kind of move forward with the financial decisions that we were going to be making, in terms of putting it away for savings," said Chambers, who figures he may have to hire an accountant to figure out his taxes over the next couple of years.
Ottawa tax lawyer, David Debanham, doesn't think the tax confusion is the biggest problem for those caught up in the Phoenix fiasco.
We're just not really sure when this is all going to be resolved.- Jonathan Chambers, public servant
"To my mind the real problem is people who are living paycheque to paycheque. So that if they don't get their paycheque on time, they're now it in negative cash flow and they have to borrow at exorbitant rates to make up the difference," Debanham said.
Added to his tax concerns, Chambers said it also appears on his pay stub that he's not paying into either the pension or benefit plan — but he doesn't know how those omissions will affect him.
"It's been a bit challenging to say the least, both financially and kind of personally, as well. It's created a situation of uncertainty where we're just not really sure when this is all going to be resolved," said Chambers.