How to ask for tax to be taken off CPP and OAS payments

The first tax return after retiring often holds an unwelcome line: a balance owing, sometimes of several thousand dollars, on income that arrived every month without anything apparently missing. The usual explanation is simple. For people living in Canada, no income tax is taken off Canada Pension Plan or Old Age Security payments unless they ask for it.

Asking is not complicated, and it can be changed at any time. This file explains where the request is made, how to think about the amount, and why getting it roughly right can also prevent a second set of letters from the Canada Revenue Agency.

Nothing comes off unless you ask

The government’s CPP guidance says it directly: if you live in Canada, taxes are not automatically taken off your monthly CPP payments. The OAS guidance says the same about Old Age Security. Both are taxable income, both are reported on a slip each winter (the T4A(P) for CPP and the T4A(OAS) for OAS), and both arrive gross.

This is different from most employment income, where the employer withholds tax every pay period, and different from many workplace pensions, where the plan withholds tax as it pays. It is also different for people who live outside Canada: for non-residents, Service Canada deducts non-resident tax automatically, at a rate of 25% or less depending on the country.

Why the April bill appears

The arithmetic catches people because each income source is taxed correctly on its own terms. A workplace pension may withhold enough for the pension by itself. But when CPP and OAS are added on top, with nothing withheld, the total income sits in a higher bracket than any single source suggests, and the difference is settled on the return.

Retirees with RRSP or RRIF withdrawals can see the same effect, because the withholding on those is often a flat rate that does not reflect the rest of the year’s income; the details are in what withholding tax takes from an RRSP withdrawal.

Asking online

The quickest route is My Service Canada Account, signed in through your own bookmark or the canada.ca website. For CPP, the government’s tax page directs you to the Canada Pension Plan section and the option to change your tax deductions. For OAS, Service Canada says you can start, change or stop a federal or provincial voluntary tax deduction at any time in the account, through the voluntary income tax deductions option on the OAS dashboard.

The request is for a fixed dollar amount each month. It stays in place until you change it, which matters when income changes, for example when a bridge benefit ends at 65 or a RRIF minimum begins.

Asking on paper or by phone

Not everyone uses an online account, and there is no need to. The government’s tax page lists a form, the Request for Voluntary Federal Income Tax Deductions CPP/OAS (ISP3520CPP), which is completed and mailed to Service Canada. Service Canada can also be reached by telephone through the contact numbers published on canada.ca.

Whichever route you use, the request goes directly to Service Canada. No private website, including this one, can set up or change deductions on your CPP or OAS, and none should ask for your Social Insurance Number to do so.

Working out a monthly amount

The simplest method uses last year’s return. Take the balance owing that came mostly from untaxed CPP and OAS, divide it by twelve, and request that amount, rounded up a little. The example below uses hypothetical figures to show the shape of the calculation, not an estimate of anyone’s tax.

The deduction does not change the tax; it changes when it is paid. If income is about the same next year, the balance at filing time should be close to zero, with any small difference refunded or owed as usual.

The instalment letters that can follow

There is a second reason to sort this out. The Canada Revenue Agency says you may have to pay tax instalments if your net tax owing is more than $3,000 ($1,800 in Quebec) for 2026 and in either 2025 or 2024. Instalments are due on March 15, June 15, September 15 and December 15.

In the example above, a balance of $3,400 in two of three years would cross that line, and quarterly reminders could start arriving. Voluntary deductions from CPP and OAS reduce the balance owing at filing time, which is the figure the instalment test looks at.

Who should look at this

Higher-income retirees have one more line to watch: OAS can be partly recovered once net income passes a threshold, and that recovery is itself deducted from monthly payments. It works separately from voluntary deductions and is explained in the form that can lower OAS clawback deductions.

The short version

CPP and OAS arrive without tax taken off for Canadian residents. A voluntary deduction, requested in My Service Canada Account, on form ISP3520CPP or by phone, spreads the tax across the year instead of leaving it for April. It does not change what you owe, but it can prevent a bill you were not expecting and the instalment letters that sometimes follow. The annual CPP adjustment each January is also a good moment to check whether the amount still fits.

SOURCES ON FILE

1. Government of Canada — Managing your taxes (CPP and OAS) — voluntary deductions online or on form ISP3520CPP; non-resident tax.
2. Government of Canada — Old Age Security in My Service Canada Account — start, change or stop voluntary tax deductions at any time.
3. Government of Canada — CPP retirement pension: receiving your benefits — taxes are not automatically taken off for residents of Canada.
4. Canada Revenue Agency — Income tax instalments — $3,000 ($1,800 in Quebec) threshold and due dates.

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