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You are receiving compensation from the CNESST (Quebec’s workers’ compensation board) after a workplace accident, and a very understandable worry sets in as tax season approaches: will these payments inflate your tax bill? The short answer is reassuring: no, the benefits paid by the CNESST are not taxable. But be careful, because this answer hides two very real traps. You still have to report the payments on your income tax return, and in Quebec, the notorious box M of the RL-5 slip can push up the tax you owe even when the benefit itself is not taxed.
In this guide, our lawyers who focus on administrative law explain how to report your CNESST payments, what your T5007 and RL-5 slips contain, which amounts paid by your employer are taxable, and what to do if your income replacement indemnity is denied or cut off.
The Short Answer: CNESST Payments Are Not Taxable, but You Must Report Them
Under both federal and Quebec tax law, the workplace accident benefits paid by the CNESST (the Commission des normes, de l’équité, de la santé et de la sécurité du travail) are not taxable income. No income tax is withheld from your income replacement indemnity, which equals 90% of your net salary.
The duty to report them, however, remains complete. Each year, for the tax year in which you received CNESST payments, you receive two tax slips: the T5007 (Statement of Benefits) for the Canada Revenue Agency (CRA) and the RL-5 slip for Revenu Québec (Quebec’s revenue agency). These amounts must appear on both your provincial and federal income tax returns, even though they are not taxed directly. The slips are available in early February, including in your MonEspace CNESST online account.
Why report an amount that is not taxable? Because the tax authorities use it to calculate your net income, which determines your eligibility for several tax credits and benefits: the Canada Child Benefit, the GST/HST credit, the Guaranteed Income Supplement and other programs calculated based on family income.
A non-taxable benefit can still increase the tax you pay: that is the whole subtlety of the Quebec system.
How to Report Your CNESST Payments Step by Step
The reporting mechanics are simple once you know them. Here is how to proceed:
- Get your tax slips. The T5007 and the RL-5 slip are issued before the end of February and available in MonEspace CNESST.
- On your federal return, enter the amount from box 10 of the T5007 on line 14400 of your income tax and benefit return.
- Enter the same amount as a deduction on line 25000. The result: the benefit is included when your net income is calculated, but comes back out before your taxable income is calculated. You pay no federal tax on this amount.
- On your provincial return, carry over the amounts from the RL-5 slip according to the applicable box (box C, E, M or P) on your Revenu Québec return.
- Keep your supporting documents. Do not send them with your return, but keep them in case of an audit.
A retroactive payment is reported in the year you receive it, even if it covers earlier years. And if you repaid your employer amounts it had advanced to you, the deduction is claimed on line 22900, based on the amount shown in box 77 of your T4 slip.
The Box M Trap: When a Non-Taxable Benefit Raises Your Tax
This is the part that almost no one explains to injured workers. In Quebec, the amount shown in box M of your RL-5 slip reduces your basic personal amount, the income threshold that is exempt from tax and applies to every taxpayer. In practical terms, for each day of compensation paid by the CNESST, your basic personal amount goes down.
The consequences can be surprising. According to the analysis by UTTAM (the Union des travailleuses et travailleurs accidentés ou malades, an injured-workers’ advocacy group), for a full year of compensation this tax measure represented additional tax that could exceed $2,000 (based on 2018 figures). The extra tax depends on the number of days compensated, not on the amount received: a worker compensated for six months can therefore see their provincial tax bill rise by more than $1,000, even though their income replacement indemnity remains non-taxable.
This measure also affects road accident victims compensated by the SAAQ (Quebec’s automobile insurance board), whose files our SAAQ lawyers defend, as well as people compensated by the IVAC (Quebec’s crime victims compensation board). Note that the amounts paid to victims of crime do not have to be reported federally, so it is normal for your RL-5 slip to show an amount in box E while the T5007 stays empty. We have also covered a related question in more detail: are IVAC monetary compensations taxable?
Amounts Paid by Your Employer: Taxable or Not?
Not every amount you receive after a workplace accident comes from the CNESST, and the tax treatment differs depending on the period and the nature of the payment. Here are the rules set out by the Act respecting industrial accidents and occupational diseases (LATMP):
- The day of the accident: your employer pays you the equivalent of your salary for the part of the day when you were unable to work. This amount is treated as employment income: it is taxable, with the usual source deductions and contributions.
- The first 14 days after the accident: your employer pays you 90% of your net salary. This amount is an indemnity for loss of income, non-taxable and with no source deductions.
- Any excess paid by the employer: if your employer pays you more than the indemnity provided under the LATMP, the difference is taxable employment income.
- From the 15th day until the CNESST’s decision: if your employer keeps paying you while waiting for the decision, these amounts are normally treated as employment income, with source deductions.
The picture changes again if you receive a wage loss replacement (salary insurance) benefit paid by a private insurer: these amounts are generally taxable, unlike CNESST benefits. This is an important distinction for anyone who has both a CNESST file and an insurer denial; our disability insurance lawyers regularly see these mixed situations.
To find out which amounts you are entitled to based on your situation, see our guide on how much the CNESST pays as well as our overview of the benefits you are entitled to after a workplace accident.
Which CNESST Benefits Appear on Your Tax Slips?
The T5007 slip and the RL-5 slip bring together all the amounts the CNESST paid you during the tax year. Depending on your claim file, they may include:
- the income replacement indemnity (IRI) paid during your inability to work;
- the indemnity for loss of income tied to a temporary or permanent disability;
- survivor benefits paid to the spouse or dependent children of a deceased worker;
- certain amounts tied to a permanent impairment following an employment injury or an occupational disease.
How long the IRI is paid depends on your ability to return to work, a decision that belongs to the CNESST, not to your doctor. The rules also change with the worker’s age; our article on permanent impairment after age 65 explains where things stand. And if you are still at the initial stage, our guide on how to report a workplace accident will help you avoid the missteps that delay compensation.
Reimbursement of medical, travel or rehabilitation expenses is not income: these amounts have no tax impact.
Denied, Cut or Miscalculated Benefits: Your Options
Tax is not the only place a CNESST file can go off the rails. A rejected diagnosis, an IRI stopped too soon, a miscalculated salary base: all of these decisions have a direct impact on the payments you receive, and therefore on the amounts that will appear on your tax slips.
The good news: every CNESST decision can be challenged. You have 30 days to request an administrative review, then 45 days to take the file to the Administrative Labour Tribunal (TAT) if the reviewed decision does not suit you. These deadlines are strict and start running as soon as you receive the decision. Our guide on how to challenge a CNESST decision walks through the options at each step.
How Accident Solution Helps You With Your CNESST Benefits
At Accident Solution, we defend Quebec workers harmed by a CNESST decision from our offices in Montreal and Quebec City, with 30 years of combined experience in administrative law. Our hybrid model, rare in Quebec, gives you the choice: being represented by a CNESST lawyer who is a member of the Quebec Bar or, at a lower cost, by an administrative appeals expert. Our team pairs our lawyers with occupational health and safety (OHS) experts to build strong files, from the initial claim through to the hearing before the TAT.
The first consultation is free, we respond within 24 hours, and we travel to your home when your condition requires it. If a decision affects your compensation, your tax slips or your replacement income, have it reviewed before the deadlines to challenge it run out.
Frequently Asked Questions: Are CNESST Payments Taxable?
Are CNESST payments taxable in Quebec?
No. The benefits paid by the CNESST, including the income replacement indemnity, are not taxable, either federally or provincially. You must still report them on both of your income tax returns, because they are included in the calculation of your net income and affect certain credits and benefits.
Where do I enter the amount from my T5007 slip?
Enter the amount from box 10 of the T5007 on line 14400 of your federal return, then claim the equivalent deduction on line 25000. The benefit is thus included in your net income without being taxed. On your provincial return, carry over the amounts from your RL-5 slip according to the applicable box.
What is box M of the RL-5 slip?
Box M shows the amount that reduces your basic personal amount in Quebec, because the CNESST took it into account when calculating your benefit. This reduction can lead to additional provincial tax, even though the benefit itself is not taxable. It is the least understood tax impact of CNESST payments.
Is the salary paid by my employer during the first 14 days taxable?
No, for the portion equal to 90% of your net salary: this amount is an indemnity for loss of income, paid with no source deductions. On the other hand, the part of the day of the accident paid by the employer and any excess beyond the indemnity provided under the LATMP are treated as taxable employment income.
What should I do if the CNESST denies or cuts my benefit?
Act quickly: you have 30 days to request an administrative review of the decision, then 45 days to challenge it before the Administrative Labour Tribunal (TAT). A CNESST lawyer can review the decision, build the medical evidence and represent you. At Accident Solution, the initial consultation is free and we respond within 24 hours.
Please note: this article is for information purposes and does not replace legal advice tailored to your situation.