CPP and EI Premiums - Lecture notes 12 PDF

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CPP and EI Premiums ...

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CPP and EI Premiums

Canada Pension Plan (CPP) premium rates Year

2008

2007

2006

2005

2004

$44,900

$43,700

$42,100

$41,100

$40,500

basic exemption

$3,500

$3,500

$3,500

$3,500

$3,500

rate

4.95%

4.95%

4.95%

4.95%

4.95%

maximum pensionable earnings

employee/employer maximum

$2,049.30 $1,989.90 $1,910.70 $1,861.20 $1,831.50

self-employed maximum

$4,098.60 $3,979.80 $3,821.40 $3,722.40 $3,663.00

The new CPP premium tables are not yet available. See the November 2, 2007 Canada Revenue Agency (CRA) news release. For 2007, see the CRA publication T4032 Payroll Deduction Tables effective January 1, 2007. Who has to pay CPP premiums? Employers are responsible for deducting the above premiums from employees who are 18 to 69 years old, unless the employee is collecting a CPP retirement or disability pension. The employer pays the same premium as the employee. Self-employed people must pay both the employee and employer portions. There are some types of employment and other payments from which CPP premiums do not have to be deducted. See Employment not subject to CPP and Benefits & payments NOT subject to CPP on the CRA website. When a person has both employment and self-employment earnings, the total CPP premium paid will be based on total employment plus self-employment earnings. See the following example of the calculation, for 2006, as it would be calculated on Schedule 8 of the personal tax return. Pensionable net self-employment earnings Employment earnings not shown on a T4 slip on which you elect to pay additional CPP contributions

$20,000

Subtotal (zero if negative)

$20,000

Pensionable employment earnings from T4

35,000

Total pensionable earnings

$55,000

Less basic exemption

-3,500

Earnings subject to contribution (maximum $38,600)

$38,600

CPP contributions @9.9%

3,821.40

Less contributions paid through employment (from T4)

$1,559.25

x2 =

-3,118.50

Contributions payable on self-employment and other earnings (zero if negative)

$702.90

The taxpayer would have to remit $702.90 of CPP premiums along with taxes payable. In calculating taxes payable, a non-refundable tax credit would be allowed based on CPP of $1,559.25 paid on employment earnings, plus 50% of the $702.90 CPP on self-employment earnings, or $351.45 The other 50% of CPP on self-employment earnings, or $351.45, is allowed as a deduction from income. This deduction is the employer portion of the CPP contribution. When an employee files a tax return, a non-refundable tax credit is calculated based on CPP premiums paid. [back to top] Employment Insurance (EI) premium rates Year maximum insurable earnings basic exemption employee rate employee maximum employer rate employer maximum self-employed

2008

2007

2006

2005

2004

$41,100

$40,000

$39,000

$39,000

$39,000

nil

nil

nil

nil

nil

1.73%

1.80%

1.87%

1.95%

1.98%

$711.03

$720.00

$729.30

$760.50

$772.20

2.42%

2.52%

2.618%

2.73%

2.772%

$994.62 $1,008.00 $1,021.02 $1,064.70 $1,081.08 n/a

n/a

n/a

n/a

n/a...