How to Reduce Your OAS Recovery Tax at Source (T1213-OAS Guide)

If your net income exceeds the government’s established threshold, a portion of your Old Age Security (OAS) pension is clawed back, which is known as the OAS recovery tax. In many cases, this is deducted monthly from your pension payments based on your income from the previous year.

However, if your financial circumstances have changed and your current-year income is expected to be significantly lower, you may be overpaying this recovery tax. You can request a reduction in these withholdings by submitting Form T1213(OAS) to the Canada Revenue Agency (CRA).

Understanding the OAS Recovery Tax (Clawback)

The OAS recovery tax is a 15% repayment applied to every dollar of net world income you earn above the annual threshold.

• How it works: The CRA uses your income from the previous tax year to calculate the recovery tax for the period of July to June of the following year.

• The Problem: If you had a high-income year previously but have since retired, sold assets, or experienced a drop in income, you may be paying a recovery tax based on income you no longer earn.

   

How to Request a Reduction: Form T1213(OAS)

You can apply to have this tax reduced at the source, ensuring you keep more of your monthly pension payments.

Prerequisites Before You Apply

• Tax Compliance: You must have filed your tax returns for the last three years and have them assessed by the CRA.

• No Outstanding Debt: You must have paid any amounts owing in full.

• Accurate Estimates: You will need to estimate your current year’s gross income, deductions, and tax credits.

   

Steps to Submit Your Request

1. Download the Form: Obtain Form T1213(OAS) from the official Government of Canada website.

2. Fill Out the Details: You must provide estimated amounts for employment income, pension income (CPP/OAS/Private), investment income, rental income, and any eligible deductions or tax credits.

3. Include Supporting Documents: You must attach proof to justify your estimated deductions or credits.

4. Submission: * Online: Submit through the “Submit Documents” service in your CRA “My Account.”

   • By Mail/Fax: Send the completed form and documents to your regional Tax Services Office as indicated on the form instructions.

Processing Time

If your request is approved, the CRA will transmit the information to Service Canada. This process typically takes approximately two months to reflect in your pension payments.

Submitting the T1213OAS form

To submit the T1213OAS form, or the Request to Reduce Old Age Security Recovery Tax at Source, you will need to follow a few steps:

1. Obtain the Form: First, you need to get a copy of the T1213OAS form. You can download it from the Canada Revenue Agency (CRA) website or order a paper copy directly from the CRA.
2. Complete the Form: Fill out the form with accurate information regarding your expected income for the year. This includes reporting any deductions or credits you plan to claim that could affect your income level.
3. Gather Supporting Documents: Along with the completed form, you’ll need to provide supporting documentation that justifies the reduction in your OAS recovery tax. This might include documents related to your income, deductions, or any changes in your financial situation.
4. Submit the Form and Documents: You need to mail the completed form and any supporting documents to the CRA. The address to which you should send the form can be found on the form itself or on the CRA website. Make sure to send it to the specific address listed for handling T1213OAS forms to avoid delays in processing.
5. Wait for Approval: After submitting the form, the CRA will review your application. If they approve your request, they will adjust the tax withheld from your OAS payments accordingly. If more information is needed, they may contact you.

It’s a good idea to submit the form well in advance of when you want the changes to take effect, as it can take some time for the CRA to process your request. Additionally, keep a copy of the form and your supporting documents for your records.

More Read: Common reasons why your pension amount is reduced?

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