Employment Insurance for the Self-Employed

Self-employed persons are ineligible for regular EI benefits due to lay-offs or business slow-downs. But they can now elect to receive EI benefits for the following benefits...

• Maternity benefits (15 weeks maximum) are available to birth mothers and cover the period surrounding birth
• Parental/adoptive benefits (35 week maximum) are available to adoptive or biological parents while they are caring for a newborn or newly adopted child, and may be taken by either parent or shared between them
• Sickness benefits (15 weeks maximum) which may be paid to a person who is unable to work because of sickness, injury or quarantine; and
• Compassionate care benefits (6 weeks maximum) which may be paid to persons who have to be away from work temporarily to provide care or support to a family member who is gravely ill with significant risk of death

In order to be eligible for benefits, the individual must register with the Canada Employment Insurance Commission on-line through Service Canada. For the purposes of this EI program, you are considered self-employed if you operate your own business or are employed by a corporation and control more than 40% of the voting shares.

Opt-out. Once registered, you will have 60 days to change your mind. Assuming that you do not collect any EI benefits, you may choose to opt-out at the beginning of any calendar year. If you do receive EI benefits, you are no longer eligible to opt-out of the EI program on self-employed earnings, ever. This stipulation remains in effect regardless of your self-employed status or change in self-employment. Once you receive a benefit, you will continue to remain in the program and pay annual premiums.

Income and Premium Requirements. Self-employed persons deciding to “opt-in” will pay the same EI premium as an employee. The business however, will not be required to pay the employer’s portion of the EI premium. Premiums will be paid on the individual’s personal tax return annually and a minimum self-employed income of $6,000 is required. EI premiums must be paid for one year prior to filing a claim. EI premiums on self-employment income are calculated on Schedule 13.

Repayments of EI and CPP. Because there is often a multi-year process to sort out repayments of those various income sources that overlap in the onerous qualification process and waiting periods. If a repayment is necessary, it is claimed as a deduction on Line 232 Other Deductions, in the year the repayment took place.

Legal Fees. Legal fees paid to object to or appeal a decision under the Income Tax Act, the Unemployment Insurance Act, the Employment Insurance Act, the Canada Pension Plan Act or the Quebec Pension Plan Act are deducted here, too.

Excerpted from Jacks on Tax. © Knowledge Bureau, Inc. All rights reserved.