Employment & Employees, Employment Insurance (EI), Tax Basics

Explaining Employment Insurance

Employment Insurance (EI) is a program administered by Employment and Social Development Canada which provides temporary income support to unemployed workers. There are many different types of regular and special benefits available for different situations. Consult the links below for the requirements for each type of benefit.

  • Regular EI Benefits: These benefits are for individuals who lose their jobs through no fault of their own (for example, due to a shortage of work, seasonal or mass lay-offs) and are available for and able to work, but can’t find a job.
  • EI Benefits for the Self-Employed: Self-Employed persons are eligible for six different types of “special benefits”. These benefits are explained in detail in this article for TurboTax: CPP and EI Considerations For Self-Employed Canadians.
  • EI Sickness Benefits: If you are unable to work due to a medical reason, you may be eligible for up to 15 weeks of financial assistance from this program.
    • You must get a medical certificate to show that you’re unable to work for medical reasons. Medical reasons include illness, injury, quarantine or any medical condition that prevents you from working.
  • EI and Teachers: Some teachers may be paid EI benefits, but there are some variations to the EI rules due to contractual agreements.
  • EI and Farmers: Some farmers who do not fall under the Self-Employed rules for EI, may be eligible for benefits.
  • EI Fishing Benefits: Fishing benefits are provided to qualifying, self-employed fishers who are actively seeking work. Unlike regular EI benefits, eligibility for EI fishing benefits is based on earnings, not insurable hours of employment.
  • EI Maternity and Parental Benefits: If you are away from work because you are pregnant or have recently given birth, you may qualify for these benefits. Parental benefits are available to parents who take time away from work to care for their newborn or newly adopted child.
  • EI 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.

Paying EI Premiums

Your employer automatically deducts your EI payments from your paycheque and remits these monthly remittances to the Canada Revenue Agency (CRA) to fund the EI program.

There are annual maximum insurable earnings and maximum premiums payable each year. These rates change annually and current and previous maximums can be found in this link.

Understanding the Purpose of EI

EI premiums are taxes used to fund federal safety-net programs. If a taxpayer cannot work due to illness, pregnancy, or certain family events, they may qualify to receive EI payments.

Applying for benefits is done through Service Canada, and depending on your situation, you may be able to receive regular benefits for 14 to 45 weeks. 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.

Filing Your Taxes

When you receive your T4 Statement of Remuneration Paid from your employer, your EI Insurable Earnings appears in Box 24, and your EI Premiums Paid appear in Box 18.

The amount of your EI premiums paid are entered on Line 31200 – Employment Insurance Premiums Through Employment of your income tax return. Quebec residents may have an amount in Box 55 which is reported on Line 31205 – Provincial Parental Insurance Plan (PPIP) Premiums Paid.

If the amount in Box 18 exceeds the maximum premiums payable, you will have that amount refunded to you on Line 45000 – Employment Insurance Overpayment. The maximum premiums payable for the 2020 tax year is $856.36.

There are many different situations in which you may have overpaid EI premiums throughout the year. For example, if you had two jobs, your employers likely calculated your EI payments as though you had only one job. However, if your combined income exceeded the EI maximum, you may have overpaid. If you are unsure whether or not you have overpaid, use Form T2204, Employee Overpayment, Employment Insurance Premiums, to calculate whether or not this is the case.

Finally, the CRA does not expect very low-income earners to pay EI premiums. If you have earned less than $2,000 in insurable income, the amount from Box 18 of your T4 does not get entered on Line 31200 of your income tax return. Instead, that amount is claimed on line 45000 and a refund is issued.

If you receive EI benefits or “collect EI” at any time during the tax year, you will receive a T4E – Statement of Employment Insurance Benefits slip. The amount of these benefits are entered on Line 11900 – Employment Insurance and Other Benefits.

  • Note: If you made a repayment of EI benefits which you received in error, you will be issued a T4E slip, even if you did not collect EI. This repayment amount is shown in Box 30 of the slip and reported on Line 23200 – Other Deductions of your tax return.

Overpayments, Repayments and the EI Clawback

  • Overpayment of EI Premiums: This is explained above and solved when you file your income taxes. Using tax software such as TurboTax takes all the worry out of this calculation and entering your T4s and other tax information will determine if you have overpaid the premiums and if you will see a refund on Line 45000.
  • Repayments or Overpayments of EI Benefits: An individual may have received benefit amounts to which they were not entitled and an overpayment is established. This could be a mistake due to undeclared earnings or even an error on the part of your employer or Service Canada. More information can be found in this link: Employment Insurance (EI) and Overpayments.
  • The EI Clawback: If your net income exceeds a certain amount and you collected EI Benefits, you may have to repay some of these benefits through what is known as the EI Clawback. This is called a Social Benefits Repayment and entered on Line 23500 of your tax return.

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