I am of retirement age and "state of mind", living and employed in Ontario, Canada. My employer is ready to offer me a lump sum for an amicable separation. I am concerned about the tax implication of a lump sum received in the current year. They are not open to a salary continuance - they seem to be of a mind of "one and done". RRSPs/TFSAs are not an option as my contribution room for each are already "maxed" out. Are there any other options that would allow me to defer tax to the next year, and if so, how would they work?
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It would obviously delay things, but couldn't you just retire on January 3rd or sometime after the new year?– NosjackCommented Aug 18 at 19:23
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Will it definitely be taxable? taxpage.com/articles-and-tips/…– VickyCommented Aug 18 at 20:02
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@Nosjack for reasons I won't go into here, time frame will be relatively soon, so unavoidably in the current year.– Anthony XCommented Aug 18 at 23:50
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@Vicky I don't see how it could be seen as anything other than replacement of income, so definitely taxable.– Anthony XCommented Aug 18 at 23:51
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1 Answer
I've been in a very similar situation in Ontario, and the bad news is neither I nor my financial advisor were able to come up with a way to do what you are trying to do. Not to say that you may not find a more inventive financial advisor, but I wanted you to know my experience.
Attempting to get a deferred payment from the company is probably futile. I asked a couple of times and got a flat "no" with no room for negotiations. I think it costs them tax money on their side.
RRSP is of course the best way to do this, but if you are maxed it doesn't help. The good news is that if you get any income next year you will get the full contribution allowance.
You can cut down how bad you tax bill looks with something like charitable contributions, but since they are fixed rate they don't really help.
Do post your own answer if you find a way.
