Amounts received as employment insurance (EI) benefits are included at line 119 of your tax return. These benefits are usually the result of unemployment or maternity leave. The government sends a T4E slip to each individual who received these benefits during the year. This slip details the benefits you received, plus the amount of tax withheld on these benefits.
Much to the surprise and chagrin of EI recipients, the government holds back part of your cheques as "tax withheld." The calculation used to estimate your tax generally assumes you will be in the lowest tax bracket and withholds accordingly. The amount in box 14 "Total benefits" of the T4E is the amount to be entered at line 119. The tax withheld in box 22 is deducted at line 437.
Some EI benefits are not included in income. These benefits are payments for a course or retraining program to facilitate reentry into the labour force, and will not appear on the T4E slip.
EI clawback
If you have collected EI benefits in the year, and your net income as determined from line 234 of your income tax return is greater than $48,750, you may be required to pay back a portion of the benefits you've received.
If you received maternity, parental, or sickness benefits in 2000 or 2001, you will not have to repay those benefits. This ensures that parents who stay home with their newborn children or workers who are too sick to work are not penalized. If you repaid any of these benefits in 2000, the Canada Customs and Revenue Agency (CCRA) will reassess your return under these new repayment rules and will issue any necessary refunds.
If you are a first-time claimant of regular or fishing benefits, you will not have to make any repayments.
The back of your T4E slip contains the details of how to calculate this clawback. If an EI repayment is required, make the deduction for the repayment at line 235 "Social benefits repayment," and record the repayment itself at line 422. You may also have to repay your EI benefits if you become ineligible to receive benefits. This type of repayment typically occurs when you've been receiving EI while injured and off work, and then you get a CPP disability pension that pays you retroactively from the time of injury. These repayments are deducted at line 232 "Other deductions."
EI premiums
For the year 2001, the maximum annual insurable earnings are $39,000 with a premium rate of 2.25 percent. If you earn $39,000 or more, your employer will withhold the maximum premium of $877.50 ($39,000 x 2.25 percent). All EI premiums paid entitle you to a 16-percent non-refundable tax credit. If your EI insurable earnings fall below $2,000 for the year, you will receive a full refund of premiums paid for the year. If, on the other hand, you overcontribute to EI because your employer withheld too much or because you had more than one job in the year and both employers withheld the maximum, the overcontribution can be deducted at line 450 of your return.
If you are self-employed, you are not required or permitted to pay EI premiums. Unfortunately, you are also not eligible to collect EI if you find yourself out of work.
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