How to Set Up a CPP/OAS Voluntary Tax Deduction to Avoid Clawbacks

Managing Your Retirement Taxes Automatically

When you begin receiving your Canada Pension Plan (CPP) and Old Age Security (OAS) payments, the Government of Canada does not automatically deduct income tax from your monthly benefits. Because both CPP and OAS are considered taxable income, many Canadian retirees surprise themselves at the end of the tax year with a large balance owing to the Canada Revenue Agency (CRA).

To prevent this financial strain, or to protect yourself against the costly OAS clawback (Recovery Tax), you can voluntarily request that Service Canada withhold federal income tax from your monthly payments. This fact-dense guide walks you through the exact forms, phone numbers, processing timelines, and strategic adjustments needed to fully secure your retirement income.

Options to Request or Change Your Voluntary Tax Deductions

Service Canada provides two primary pathways to initiate, change, or cancel a voluntary tax deduction from your public pension payouts.

Step-by-Step Setup: Form ISP-3520 vs. Direct Phone Call

Method 1: The Fast-Track Phone Option

You can bypass physical paperwork by contacting the Service Canada Pension Call Centre directly.

• Phone Number: 1-800-277-9914 (Toll-Free inside Canada)
• Hours of Operation: 8:30 AM to 4:30 PM local time, Monday through Friday.
• What to Have Ready: Your Social Insurance Number (SIN) and details regarding your current gross monthly CPP/OAS amounts.
• Execution: Instruct the agent to deduct either a flat dollar amount or a precise percentage from your monthly checks.

Method 2: The Mail-In Form Option

If you prefer written records, you can download, sign, and mail the Request for Voluntary Federal Income Tax Deductions Form (ISP-3520).

1. Download the Document: Obtain the official PDF file via the Service Canada portal.
2. Specify the Benefits: Indicate clearly whether the tax deduction applies to your CPP, your OAS, or both.
3. Choose Your Deduction Type: Specify a monthly flat dollar amount (e.g., $200 per month) or a percentage rate.
4. Sign and Mail: Send the completed form to your nearest regional Service Canada Pension Office.

Frequently Asked Questions

• How long does it take for a pension tax deduction change to take effect?
  Once your request is successfully logged over the phone or fully processed via mail by Service Canada, the deduction or updated amount will be withheld starting with your very next scheduled monthly payment.
• Can couples combine their voluntary tax deductions onto one request?
  No. CPP and OAS accounts are tied explicitly to individual Social Insurance Numbers. If both you and your spouse wish to lower or raise your monthly tax withholdings, you must submit separate requests or place individual phone calls to Service Canada.
• What happens if I accidentally request too much tax to be deducted?
  If you realize your monthly deductions are too high, you can call 1-800-277-9914 immediately to lower the amount. Any excess tax already withheld will be thoroughly calculated when you file your annual income tax return, resulting in a larger refund check from the CRA.

 If you would like to request Service Canada pension office to withhold a percentage or fixed amount of your CPP or OAS benefits for tax deductions, you may either:

1. Complete and mail the Request for Voluntary Federal Income Tax Deductions form (ISP-3520). Click here to download.
2. Call the pension call centre at 1-800-277-9914 to speak with a call centre agent to set up right away.

Once the voluntary tax deduction is set, the amount will be withheld as of the next month’s payment.

If you would like to change the voluntary tax deduction amount, you may also call the pension call centre to adjust the amount. The new deduction will be in effect as of your next month’s payment.

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