The Canada Revenue Agency (CRA) has long kept a close eye on tax reporting, but for CPP beneficiaries, that scrutiny is only increasing. With more retirees working part-time, managing side income, or pulling dividends from investment portfolios, there’s more room for mistakes, and unfortunately, more ways to raise red flags. And in a time when younger workers are planning big career shifts, as shown in a recent CVwizard study, many older Canadians are holding on tight to their benefits. For CPP beneficiaries hoping to stay on the CRA’s good side, now is the time to double-check your records, especially if you hold income-generating investments like the Bank of Montreal (TSX:BMO).
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About BMO
BMO remains one of Canada’s most stable dividend-paying stocks. In its second-quarter 2025 earnings, BMO posted net income of $2 billion and earnings per share (EPS) of $2.50, up from $2.36 the year before. Adjusted net income hit $2.1 billion, with adjusted EPS at $2.62. It also raised its dividend to $1.63 per share, marking a 5% increase from last year and 3% from last quarter. That’s an annualized payout of $6.52 per share, which can go a long way toward supplementing CPP in retirement!
But there’s the rub. Dividends you receive in non-registered accounts must be reported on your T5 slip, even if you reinvest them. The CRA monitors unreported investment income, including Canadian dividends you collect outside registered plans. If you’re receiving Old Age Security and you fail to include that extra income, it can push your net world income above the OAS recovery threshold ($90,997 for 2024) and trigger a clawback.
Red flags to watch
The first red flag is underreporting dividend income, or assuming that because you hold stocks in a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), there’s nothing to report. You need to know which accounts are taxable and which slips (T5 for non-registered dividends, T4RSP/T4RIF for RRSP/RRIF withdrawals) flow onto your return.
The second red flag is misunderstanding how CPP fits into your overall tax picture. While you can start CPP as early as age 60, those benefits are fully taxable and add to your net income. If you pair early CPP with dividends from non-registered holdings, your marginal tax rate can spike. It can also push you over income thresholds used for other benefits, like the GIS, which cuts off at $22,272 (single) for July 2025 to June 2026. The CRA doesn’t penalize you for earning more, but it does expect full transparency when multiple taxable streams overlap.
The third red flag is failing to track capital gains when you make portfolio changes. If you sell BMO shares outside a TFSA or RRSP, 50% of your gain (proceeds minus your adjusted cost base (ACB)) is taxable. Forgetting to track your ACB or splitting sales into multiple transactions can lead to underreporting. And if your return triggers an audit, reconstructing those numbers years later can be challenging, especially for retirees without an advisor. The CRA cross-checks your reported gains against transaction data and expects your Schedule 3 numbers to line up.
What to do
So what does this mean for CPP beneficiaries who still want to invest? It’s not a warning to avoid dividend stocks like BMO – in fact, quite the opposite. A high-quality bank stock with a growing payout can add meaningful, long-term income to any retirement plan. BMO recently increased its quarterly dividend by 5% year-over-year to $1.63 per share and maintains a robust Common Equity Tier 1 ratio of 13.5%, underscoring its capital strength. Remember that CPP benefits themselves are taxable income but are not income-tested, so earning dividends won’t reduce your CPP payment. The key is to know how dividend income from non-registered accounts flows onto your T5 slip and affects your overall tax liability, and that’s exactly what the CRA will be watching for.
While Gen Z and Millennials are looking for job security in an uncertain market, older Canadians are seeking income security in retirement. The CRA’s attention on CPP recipients reflects that shift. But with a little awareness and the right investment strategy, you can stay off the CRA’s radar and keep those dividend cheques rolling in.
Bottom line
Whether you’re transitioning out of the workforce or already receiving CPP, investing in a stock like BMO can help bridge the gap between what the government pays and what you need to live comfortably. Just make sure the tax side of the equation is as tidy as the investment side.
