By Terry Pedwell
THE CANADIAN PRESS
OTTAWA - The federal government says it's preparing to address one of the key tax issues that has caused massive headaches for government employees overpaid by its problem-plagued civil service pay system.
The Finance Department has drafted legislation that would see overpaid employees – regardless who they work for – required to repay only the amounts deposited into their bank accounts in a prior tax year.
Under current legislation, any employee who received an overpayment in a previous year is required to pay back the gross amount of the overpayment to their employer, which includes income taxes, Canada Pension Plan contributions and Employment Insurance premiums that were already deducted.
The law has caused huge problems for thousands of federal employees who were overpaid through the government's buggy Phoenix pay system.
In many cases, the law required them to pay back to the government hundreds, and even thousands, of dollars they never received.
The Public Service Alliance of Canada, which represents the bulk of federal workers, had called on the federal government to exempt civil servants from the tax law, given the size and complexity of overpayments made through the Phoenix system.