Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Are amounts excluded from T5007 reporting by subsection 232(4) of the Regulations worker's compensation for purposes of paragraph 56(1)(v)?
Position: It is the practice of the CRA not to include these amounts in the net income of the recipients.
Reasons: It is our understanding that the purpose of subsection 232(4) of the Regulations is to exclude those amounts from the calculation of income-tested benefits.
July 4, 2006
Ms. Debbie Anderson HEADQUARTERS
Winnipeg Tax Services Office Shaun Harkin, CMA
Client Services Division 613-957-9229
2006-019150
Technical Interpretation Request - Lump Sum Workers Compensation Benefits
We are writing in response to your email of June 14, 2006, concerning the reporting of workers compensation benefits ("WCB"). You indicated that the surviving spouse of a worker received a lump sum WCB payment as a result of her husband's death. Because she was issued a T5007 in respect of the payment, the amount was included in her net income and certain net income-tested benefits were affected.
Paragraph 56(1)(v) of the Income Tax Act (the "Act") includes in income of a taxpayer "compensation received under an employees' or workers' compensation law of...a province in respect of...death". Pursuant to subsection 232(1) of the Income Tax Regulations (the "Regulations"), payers of amounts described in paragraph 56(1)(v) of the Act must file a T5007 information return and report the amounts on T5007 information slips. Subsection 232(4) of the Regulations, however, excludes from the information-reporting requirement certain WCB payments, such as those received in respect of the death of an employee (other than periodic payments made after the death of the employee).
Since subsection 232(4) of the Regulations excludes specific items from the T5007 information-reporting requirements, it is the practice of the Canada Revenue Agency not to require the excluded amounts to be included in a recipient's net income, thereby not affecting the calculation of the recipients net income-tested benefits. Therefore, in the situation you described, we are of the view that the WCB payment should be excluded from the recipient's income.
Further, we would also like to note that it is our intention to contact all provincial WCB boards to inform them of the exclusions from the information-reporting requirements to prevent the erroneous issuance of T5007 information slips in the future.
We trust the above comments are of assistance.
Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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