Qualifying Retroactive Lump-sum payment (QRLSP)

[Hosstyle]

I have received a QRLSP as a result of an arbitration award. I know if I want to submit that to show which prior years the taxes are from (on my T4) then I will have to submit a paper form along with T1198 form. I have a couple of questions on this as I have never had to deal with this before.

1) how do i know if this QRLSP/T1198 is worth submitting (i.e. how do I know if this will reduce the taxes that I pay this year)?

2) I had already pre-paid for my ufile set up for the year. what happens if i decide to submit my taxes in paper form as a result of this? 

3) is there any way to have the ability to fill out the taxes on Ufile with the T1198 on it but just not allow me to send it through netfile but allow me to print it so I can send it in manually?

This has become very confusing this year and appreciate any suggestions or input.

[Geo123]

Hello Hosstyle,

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''.

[Hosstyle]

11 hours ago, Geo123 said:

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''.

I saw that as well but couldn't recreate that at all. There is no option for T1198. I did a search in Ufile and it says that I would not be able to submit through Netfile. there is nothing anywhere for me to do that within the current interview. I wish I could as then I would just see what it does and to determine if I should submit manually with it or not do it and just use only the T4 that I got and submit through netfile. 

[Hosstyle]

FOUND IT!! So many places that say other income. When I entered the data it didnt change the outcome but not sure if that should be expected as my employment took off a boat load of taxes when back pay was provided. Not sure if worth it to send it in manually or just remove it and send via netfile. Anyone have any experience with these QRLSPs? 

Anyone know what this means? 

On 3/13/2023 at 7:04 AM, Geo123 said:

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.