Why do I owe taxes after medical release?

When you medically release, you may receive income from several taxable sources at once — a CAF pension, SISIP/CAF LTD, VAC's Income Replacement Benefit, and possibly CPP-Disability. Each payer calculates tax withholding based only on what they pay you, not your total income. At tax time, CRA looks at your total income from all sources combined. If the combined amount pushes you into a higher tax bracket, the total tax you owe can be more than what was withheld by each payer individually. This is not the same income being taxed twice. It is several taxable income streams being reconciled on one tax return. What you can do: - Collect every tax slip (T4, T4A, T4A(P), pension slips, VAC slips) - Ask each payer to increase withholding if you expect to owe at year-end - File your return early to avoid interest charges - Talk to CRA or a tax professional familiar with military and disability income