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About 6-7 months ago, a friend of mine got a job with the Canadian Government at an hourly rate. However, due to the Phoenix system debacle, he wasn't being paid for his work.

This problem has several stages, at first his "pay"stubs indicated he did 0 hours of work at $0/hour for a total of $0. After a few months of this (and repeated calls to a Phoenix people), they updated his paystubs to indicate the correct amount of hours at the correct rate, but they didn't actually deposit any money.

Eventually, they started paying him, but I believe they are still about 4-5 months behind on pay. (There is a seperate question regarding an error on his paystubs, but I'll make a second post).

He got letters from the bank proving how much the Government has deposited during the past year or so. I'm not sure if he has letters from the government which agree.

The (potential) issue is this:

When T4 slips are generated, if the T4 claims that he has been paid, does he have recourse to contest this, or is he required to pay tax despite not actually being paid?

  • At this point are the paystubs inaccurate (do they show money that was never paid)? If they are accurate, you should be fine -- T4s should be generated based on paystubs. If they are inaccurate, and the government/Phoenix are not responsive, you should probably consult a lawyer. – Magua Feb 14 '18 at 14:38
  • The issue is that for a period of about 4 (?) months, the pay stubs claimed he was being paid, but no money was actually being deposited. – Dace Feb 14 '18 at 17:24
  • Always remember that the first day any employer or person contracting you fails to pay - walk away. (Personally, I have never done anything in life, since I was about 19, without being paid entirely in advance. So if possible, do that!) – Fattie Feb 15 '18 at 13:41
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    I certainly don't agree with the idea of walking away the first day there is a hiccup. Accidents happen, and in this case, it was a huge one; if everyone working for the GoC had your attitude, the Canadian government would've lost tens of thousands of its employees almost overnight. – Dace Feb 15 '18 at 23:18
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You would be very well advised to consult with an actual lawyer on this matter.

For tax purposes, if your T4s are inaccurate and you cannot get accurate ones, Intuit recommends filing your tax return with the correct (actually paid) information. However, since this will not match what's on the T4, it is near certainty that you will end up being audited, at which point you will need to provide evidence. If you instead get reassessed, you'll need to object and again provide the evidence.

It is in your best interest to keep all records of communication with Phoenix/the government in this regard, as well as all evidence possible (paystubs, the bank letter, etc). It is imperative that you have evidence about every time that you have attempted to have the error corrected.

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Why is nobody mentioning the fact that a the accuracy of paystub can always be challenged by the bank statement for that date(if it is a direct deposit--- which should be the case fo Phoenix system)?

  • In addition to what Magua suggests, if I were you then I would not cancel my bank account where the salary was deposited for the foreseeable future. Because I am not sure how you would get transaction statement if you did that
  • I would also keep a backup of my bank statement for the duration where the paystub reported an income but nothing was deposited(scan it and upload it on Google drive or Dropbox).
  • He(Magua) just mentioned the bank letter briefly but in the interest of being very clear I have mentioned it here explicitly
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    Welcome to PF&M. Please consider editing your answer so that it answers the OP's question. Phrasing it as a criticism of existing answers is inappropriate for a question and answer site. – Rupert Morrish Mar 18 '18 at 19:10

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