How to reinstate OAS after it’s clawed back
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Q: My father’s OAS was completely clawed back last year because his net income for 2016 was well above $120,000.
For 2017, his income will be in the $40,000 range.
Will his OAS be automatically reinstated this June or does he have to contact Revenue Canada?
His OAS was always directly deposited in his bank account.
— Robert
A: It sounds like your father had an extraordinary income year, Robert. This can impact Old Age Security (OAS) pension entitlement.
To provide background for other readers, the OAS pension is a government pension that is payable as early as age 65. If your net income on your tax return exceeds a certain level, your OAS pension is reduced or “clawed back”.
For OAS recipients whose net income on line 236 of their 2017 tax returns exceeded $74,788, their OAS pension for the July 2018 to June 2019 period is reduced by 15% of the excess. So, if someone had 2017 net income of $84,788, or $10,000 over the clawback threshold, they would have $1,500 of their OAS clawed back starting in July 2018. The $1,500 clawback would be deducted equally over their 12 monthly OAS payments through June 2019.
Ask a Planner: Leave your question for Jason Heath »
For an OAS recipient who has lived in Canada most of or all their lives, who is entitled to the maximum OAS pension, their OAS is completed clawed back if their net income exceeds $121,314 for 2017.
This OAS recovery tax is treated as tax withheld on your tax return for the year it is clawed back. So, your T4A (OAS) slip will still report your full pension, with the clawback during that calendar year treated as withholding tax and credited accordingly.
If you are subject to an OAS clawback, you will be notified by Service Canada by letter. This letter is generally sent after filing your tax return in April and before your July pension payment. Canada Revenue Agency (CRA) shares your net income for the purposes of calculating OAS clawback with Service Canada, who administers the OAS.
There is a form that can be filed – form T1213(OAS) Request to Reduce Old Age Security Recovery Tax at Source. You use this form to “request to reduce your OAS recovery tax if you estimate that your income for the current year will be lower than the previous year.”
This form is optional and not at all necessary. If you have OAS clawback, remember, it’s treated as tax withheld when you file your subsequent year’s tax return. If you’re entitled to a refund, you’ll get it at that point.
In your father’s case, Robert, since his 2017 net income on his tax return is below the OAS clawback limit, his full OAS will be paid for the subsequent July to June period with no recovery tax. He doesn’t need to contact Service Canada or CRA – at least not directly. Simply filing his 2017 tax return will be all that is required to notify both of his July 2018 to June 2019 OAS entitlement.
Ask a Planner: Leave your question for Jason Heath »
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.
MORE ABOUT OAS:
- What to expect when receiving OAS at 65
- How business owners should time CPP and OAS
- Key to ‘rich’ qualifying for GIS is large TFSA
- Do bonds still belong in an RRSP?
WATCH: If I have a pension, should I cut down on bonds?[bc_video video_id=”6023925715001″ account_id=”6015698167001″ player_id=”lYro6suIR”]
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My friend has a dark blue card that he gives at the drug store , it just says Canada on the front and his name. On the back it says if you receive the Old Age Benefit , the Government asks that you extend all possible privileges to the cardholder. I don’t have one, and wondered what it was for, or how he benefits from having it.
I have a similar situation with one exception. I left Canada in September 2020 and now live in the UK. I withdrew a large amount from my RIF in 2020 to purchase a house in the UK. I receive OAS AND CPP. Because of the withdrawal in 2020, I will be well over the max income for OAS, but from 2021 on, my income will be back to my pre 2020 levels. Since I will no longer be filing Canadian tax returns, how do I report my income so that I don’t get my CPP clawed back, or get a refund I do.
I need a phone number where I can speak to some one about my situation. What is the best number to call at. I am a resident of Manitoba
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
My Oas was clawed back due to income in 2020. I have no income this year other than my cpp and oas. Will I automatically get that clawed back oas when I file my tax return in 2022 or do I have to complete form T1213?
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with a qualified advisor.
When a retired receives a one-time taxable lump sum beyond the threshold limit (ex. some insurance), is it possible to notify CRA or SC in advance for reducing tax withholding? Some sort of T1213OAS in advance. Thanks
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with a qualified advisor.
I will be in the same situation as Roberts father. I don’t think that you answered the question. If I quit working in Dec 2022 will the clawback be removed immediately My Income will still be above the threshold when I file in Feb 2023 because I am filing based on the 2022 income, or will I have to wait until the taxes are filed at the end of Feb 2024This filing will be based on a reduced income
I was not able to access the form you recommended to get my OAS reinstated. Would you be able to send it to me, or let me know where I can get it?
Thanks in advance. I appreciate the advice you provide.
Thank you for alerting us to the broken link. The article has been updated, and you should now be able to access the form.
I have a situation where my 2021 income was approx. $120,000. The “social benefits recovery” (OAS) was applied on line 23500 of my 2021 return and I paid it in full along with other taxes owing. I paid this in April 2022 when I filed my return and now OAS is recovering the (same) money I have already paid. Left hand, right hand, I expect. The recovery is a duplication. It’s maddening. I don’t know why they bother calculating a recovery tax on our returns, collect that money from us, if they apply the recovery in the next tax year. It’s scandalous really. I mean, they must KNOW what we’ve paid.
Frustrating is an understatement.
Im exhausted from waiting on hold then one CRA website to another form to another website and so on..
My 2021 tax assessment shows an income of 95K approx 20K over the allowable amount so my OAS in full has been taken in recovery. My income was only 37K but after 14 years of WSIB savings in an LRI (non-taxable disability savings) they classified it as a RRIF making it taxable and over the allowable amount. It has been garnished since last October 2022 now March 2023, 6 months.
I am not well versed in use of a computer and totally lost and since you cannot actually speak with anyone, anywhere at CRA what am I to do.
Hi Josh, I was reading the letter from the person whose father had his OAS clawed back. I am in a similar position since I worked from January to June, 2023 and then retired. In 2023 I received a payout of my sick days and as a result my income was about $30,000 above my annual salary. In April, I paid Revenue Canada the money that I owed them. However, today Service Canada sent me a letter stating my monthly OAS recovery tax will be $572.00 a month. This reduces my OAS to about $200 a month. This really impacts my income because I have my teacher pension and CPP and my very reduced OAS. I do not get funds from my RRIF until 2025 and I earn interest income of about $500/year. I have completed and submitted the request to reduce OAS recovery tax (and was advised to write a letter which I did) but I gather that this will not take effect until next year. In the mean time, I will be paying back this tax amount and then hopefully on my next income tax return, Revenue Canada will realise that I have been overtaxed and will get a refund. In the meantime after working for nearly forty years and at age 71 I feel it is necessary for me to go back to work. I have tried to call Revenue Canada but sometimes after waiting for two hours, I just give up. Thanks for reading this. Karen