Whether it’s due to the arrival of a baby, seasonal work changes, or layoffs, many Canadians will at some point in their life claim Employment Insurance (EI). EI payments are taxable income, so they affect your taxes just like any other type of income, and in some cases, you may have to repay these benefits.
What is Employment Insurance (EI)?
EI is a temporary, taxable benefit you receive when you are unemployed through no fault of your own. Administered by Employment and Social Development Canada, EI provides a financial cushion while you search for a new job or upgrade your skills. If you are ill or pregnant, you are looking after a newborn or adopted child, or you provide care for a sick family member, you may also be eligible for EI.
Where does EI money come from?
The Employment Insurance program is funded through EI premiums paid by employees and employers. Your employer automatically deducts your EI payments from your paycheque and remits these monthly amounts to the Canada Revenue Agency (CRA). So, if a taxpayer can’t work due to illness, pregnancy, or certain family events, they may qualify to receive EI payments.
Different types of EI benefits
There are different types of EI benefits and you may qualify for one or more.
- Employment Insurance Regular Benefits: If you lose your job through no fault of your own. Examples include layoffs caused by work shortages, downsizing and seasonal layoffs.
- Employment Insurance Maternity and Parental Benefits: Provides financial assistance when you are pregnant, when you adopt a child or when you are looking after a newborn.
- Employment Insurance Self-Employed Benefits: Self-Employed persons are eligible for six different types of “special benefits”.
- Employment Insurance Sickness Benefits: When you are not able to work due to illness, injury or quarantine.
- Employment Insurance Caregiving Benefits: If you take time away from work to provide care or support to a critically ill or injured person or someone needing end-of-life care, you may qualify for these benefits.
- Employment Insurance Fishing Benefits: Provides financial assistance for self-employed fishers who seek out new employment opportunities.
- Employment Insurance Teachers Benefits: Some teachers may be paid EI benefits, but there are some variations to the EI rules due to contractual agreements.
- Employment Insurance Farmers Benefits: Some farmers who do not fall under the Self-Employed rules for EI, may be eligible for benefits.
- Employment Insurance for Workers and Residents Outside of Canada: If you work outside Canada for a Canadian company or the Canadian government, you are usually covered by EI. If you are unsure if you qualify, you should ask your employer or contact the CRA
How much is Employment Insurance (EI)?
Employment Insurance (EI) usually gives you 55% of your previous income, up to a maximum of $595 per week. Your payments are based on both the unemployment rate in your area and the number of hours you worked during the 52 weeks prior to making your claim.
How long do I get Employment Insurance (EI) for?
Depending on your situation, you may be able to receive regular benefits for 14 to 45 weeks. For more detailed information, review this link from the CRA.
Do I have to pay back my Employment Insurance (EI) benefits?
While EI payments are a welcome relief, they are considered taxable income and need to be reported on your tax return.
When you file your tax return, depending on your net income for the year, you may need to repay some of your EI benefits. This is called EI clawback.
As of October 2021, if your income was over $70,375, you will have to pay back 30% of the lesser of:
- your net income in excess of $70,375; or
- the total regular benefits, including regular fishing benefits, paid in the taxation year.
You may be exempt from repaying EI in the following situations:
- Your net income in 2021 is less than $70,375.
- You have received less than a week’s benefits in the 10 previous years.
- You receive special benefits, such as maternity, parental or caregiver benefits.
- You receive EI benefits that overlap in two calendar years; this may qualify you for a tax exemption in your first tax year.
T4E – Statement of Employment Insurance Benefits
If you collect EI at any time during the tax year, you will receive a T4E – Statement of Employment Insurance Benefits slip. The T4E is issued to everyone who:
- Received Employment Insurance (EI) benefits
- Is required to make a repayment of EI Benefits
- Received EI funded financial assistance while you were taking part in an approved employment program
The information on a T4E form shows:
- The gross amount of benefits paid (including CRB).
- The amount of income tax deducted.
- The amount repaid towards any previously received overpayments, where applicable.
The T4E slip must be filed with the income tax return for the corresponding tax year.
Québec residents receive the T4EQ – Statement of Employment Insurance and Other Benefits.
Is it possible to receive more than one T4E slip?
Yes, if the benefits were paid under different programs, like a provincial and a federal program, you will receive more than one T4E slip.
If you received benefits under the Québec Parental Insurance Plan, you will get a Relevé 6 (which is applied in the provincial section of your tax return) and a Federal T4E slip.
What if I received an EI overpayment?
If you have received more benefits than the amounts you were entitled to, you must repay those amounts. The amount of the repayment will be indicated on the T4E form in the “Other Information” section. This could be a mistake due to undeclared earnings or even an error on the part of your employer or Service Canada.