Pension Problems
October 30, 2018 8:01 AM Subscribe
My mother doesn't appear to be getting the full amount of her survivor's pension from the Canada Pension Plan (CPP) and I'm not quite sure what to do. This year, her finances are a bit of a "mess" (details inside) which makes the process more confusing for me.
First, my mother hasn't traditionally been a very savvy person when it comes to finances. Before he died my father did all their financial planning.
After my father died, and after applying for the survivor's pension, last fall my mother received a letter from the CPP saying that she's eligible for their Survivor's pension and her full CPP pension should be about $800-ish (I don't have the letter in front of me at the moment. Anyway, recently, I was looking at her bank account online and I've noticed she's never actually RECEIVED that amount in her bank account. She's been receiving the same amount she got before my father died.
To complicate matters further, I made the dumb mistake of having an accountant (who wasn't a CPA) do her taxes and he made a very, very big error. The error resulted in my mother's RRSPs being counted as income in their full amounts (!!) and she had to pay a pretty large 5-figure number in taxes this year. As a result of this error, her Old Age Security pension is being clawed back until next July!! In August we met with a CPA to re-submit her taxes for reassessment, but it takes about 180 days for the reassessment.
Anyway, I still don't understand why she has never received the proper pension amount the CPP says she's entitled to? I should have looked into this way earlier, but my mother never showed me this letter until pretty recently. Can I call Service Canada on her behalf and figure out why this happened? I feel odd calling about this when her taxes are being reassessed and her OAS is being clawed back. I'm really not sure where to begin. I am pretty anxious about her not receiving the full pension, because it will make such a big difference.
First, my mother hasn't traditionally been a very savvy person when it comes to finances. Before he died my father did all their financial planning.
After my father died, and after applying for the survivor's pension, last fall my mother received a letter from the CPP saying that she's eligible for their Survivor's pension and her full CPP pension should be about $800-ish (I don't have the letter in front of me at the moment. Anyway, recently, I was looking at her bank account online and I've noticed she's never actually RECEIVED that amount in her bank account. She's been receiving the same amount she got before my father died.
To complicate matters further, I made the dumb mistake of having an accountant (who wasn't a CPA) do her taxes and he made a very, very big error. The error resulted in my mother's RRSPs being counted as income in their full amounts (!!) and she had to pay a pretty large 5-figure number in taxes this year. As a result of this error, her Old Age Security pension is being clawed back until next July!! In August we met with a CPA to re-submit her taxes for reassessment, but it takes about 180 days for the reassessment.
Anyway, I still don't understand why she has never received the proper pension amount the CPP says she's entitled to? I should have looked into this way earlier, but my mother never showed me this letter until pretty recently. Can I call Service Canada on her behalf and figure out why this happened? I feel odd calling about this when her taxes are being reassessed and her OAS is being clawed back. I'm really not sure where to begin. I am pretty anxious about her not receiving the full pension, because it will make such a big difference.
Best answer: Seconding the online account. Make yourself her delegate, and everything gets a whole lot easier. Note that this is not the same as her Revenue Canada account - the two are separate entities.
posted by Mogur at 8:52 AM on October 30, 2018
posted by Mogur at 8:52 AM on October 30, 2018
Best answer: Since you've now hired a proper CPA to do her taxes, ask them to walk you through the error that was made, and how it's being fixed. Have them do it slowly and carefully and keep asking questions until you understand what's going on. This is an unusual, and large error.
Canada Revenue, (the tax people) are different than Service Canada (The CPP and OAS People). There's nothing awkward about going to service canada and asking about CPP and OAS while you have a tax reassessment underway. Generally (and rightly!) they are pretty concerned about privacy, and so you can't just call them up on her behalf, but I believe there is a way for you to be named as someone who can contact them on her behalf. Or you can visit a Service Canada office together, or call together.
As for CPP being lower than you believe it should be, one possibility is that the government is witholding taxes, which is something some people choose to do so that they don't have to pay in installments on their own. Perhaps this is what's going on. There may be some other issue, which the Service Canada staff will help you with. Generally they will will make a catch up payment for benefits that she was entitled to, but missed.
This is also an opportunity to help your mother work through simplifying her finances and also learning about basic personal finance. Look for free seminars at the library or community centre. Consolidate checking accounts to one or at most, two institutions. Consider moving to the online banks for free checking, but be mindful that she may want to be able to speak face to face at her credit union or bank branch. Look at her bills and set up preauthorized debit, if possible. Cancel unused credit cards. Look for any monthly bills or debits on her accounts and make sure these are for services she actually uses.
Also, have a discussion with her to remind her that as an older, single woman who is not financially sophisticated, she is a prime target for scammers. Read about the Grandson Scam and the CRA scam
Ensure she has a will, and at least considers a power of attorney that you could use to help pay her bills and get cash for her if she becomes ill.
These are annoying and frustrating tasks, but you'll both feel better knowing that everything is organized well. You'll probably save her some money doing this, and if her situation is pretty stable year to year, things will stay organized pretty well for a long time.
posted by thenormshow at 12:21 PM on October 30, 2018 [2 favorites]
Canada Revenue, (the tax people) are different than Service Canada (The CPP and OAS People). There's nothing awkward about going to service canada and asking about CPP and OAS while you have a tax reassessment underway. Generally (and rightly!) they are pretty concerned about privacy, and so you can't just call them up on her behalf, but I believe there is a way for you to be named as someone who can contact them on her behalf. Or you can visit a Service Canada office together, or call together.
As for CPP being lower than you believe it should be, one possibility is that the government is witholding taxes, which is something some people choose to do so that they don't have to pay in installments on their own. Perhaps this is what's going on. There may be some other issue, which the Service Canada staff will help you with. Generally they will will make a catch up payment for benefits that she was entitled to, but missed.
This is also an opportunity to help your mother work through simplifying her finances and also learning about basic personal finance. Look for free seminars at the library or community centre. Consolidate checking accounts to one or at most, two institutions. Consider moving to the online banks for free checking, but be mindful that she may want to be able to speak face to face at her credit union or bank branch. Look at her bills and set up preauthorized debit, if possible. Cancel unused credit cards. Look for any monthly bills or debits on her accounts and make sure these are for services she actually uses.
Also, have a discussion with her to remind her that as an older, single woman who is not financially sophisticated, she is a prime target for scammers. Read about the Grandson Scam and the CRA scam
Ensure she has a will, and at least considers a power of attorney that you could use to help pay her bills and get cash for her if she becomes ill.
These are annoying and frustrating tasks, but you'll both feel better knowing that everything is organized well. You'll probably save her some money doing this, and if her situation is pretty stable year to year, things will stay organized pretty well for a long time.
posted by thenormshow at 12:21 PM on October 30, 2018 [2 favorites]
Response by poster: Thanks for all the advice!
I helped my mother set up a Service Canada account this evening and I think we've figured out why her pension is so much lower than I was expecting... it has indeed been set up with a voluntary income tax deduction from her CPP. I don't know if I'll get an answer here, and I'm sure I'm stupid for asking, but is this income tax thing just "saving her" from having to pay income tax on her pension when she does her taxes? How does this work?
thenormshow I went through the error with the CPA, the problem was that the non-CPA accountant didn't notice (and neither did I, to be fair) she didn't receive the proper documentation from her bank to offset the RSP. We got the form from TD and the new CPA understood exactly what the error was and was able to fix it. It was such an awful error and I feel soooo dumb for not understanding why a CPA designation is so important. (This scenario really changed my opinion of accountants!!) So, *fingers crossed* that the adjustment goes through and is approved.
I'm glad the situation isn't as awful as I thought it was!
(A will/POA is on our to-do list!)
posted by VirginiaPlain at 5:15 PM on October 30, 2018
I helped my mother set up a Service Canada account this evening and I think we've figured out why her pension is so much lower than I was expecting... it has indeed been set up with a voluntary income tax deduction from her CPP. I don't know if I'll get an answer here, and I'm sure I'm stupid for asking, but is this income tax thing just "saving her" from having to pay income tax on her pension when she does her taxes? How does this work?
thenormshow I went through the error with the CPA, the problem was that the non-CPA accountant didn't notice (and neither did I, to be fair) she didn't receive the proper documentation from her bank to offset the RSP. We got the form from TD and the new CPA understood exactly what the error was and was able to fix it. It was such an awful error and I feel soooo dumb for not understanding why a CPA designation is so important. (This scenario really changed my opinion of accountants!!) So, *fingers crossed* that the adjustment goes through and is approved.
I'm glad the situation isn't as awful as I thought it was!
(A will/POA is on our to-do list!)
posted by VirginiaPlain at 5:15 PM on October 30, 2018
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posted by warriorqueen at 8:32 AM on October 30, 2018