Unemployed?  Check Out Consequences on the Tax Return

Statistics Canada released new unemployment numbers for February on April 21, 2016, and unfortunately, on a year-over-year basis, there were close to 35,000 more EI beneficiaries this February than there were in the same month a year ago—an increase of 6.7%.

According to the report, in February 2016, 548,700 people received regular Employment Insurance (EI) benefits, up slightly from January (+4,200 or +0.8%). Notably, the provinces of Alberta, Saskatchewan, Ontario and Quebec all had more unemployed, while fewer people collected benefits in Nova Scotia.

There are numerous tax provisions to be aware of when you collect EI

1. Income Reporting – Employment Insurance benefits are taxable and must be added other income earned in the year.  Where the taxpayer earns other income in the year, this may lead to a balance due as the withholding rate for EI benefits is often not high enough to offset the taxes payable in those situations.
2. Repayment of EI – when a taxpayer receives regular EI benefits more than once in a ten-year period, they will be required to repay up to 30% of those benefits if their net income for the year exceeds the threshold amount.  For 2016 the threshold amount is $63,500.  The amount that must be repaid is 30% of the lesser of the benefits received and the taxpayer’s net income over $63,500.
3. Who is not eligible – employee who own more than 40% of the business or who in a non-arm’s length relationship with the owner of the business are generally not eligible to claim regular EI benefits and therefore are not required to pay EI premiums.
4. EI and the self employed - business owners and those who are not eligible for EI because of their relationship to the business owner may elect to pay EI premiums and will be eligible to collect maternity, parental, sickness, and compassionate care benefits, but not regular benefits for loss of income.  Those who elect to join pay the same premiums as regular employees and must continue to pay those premiums for as long as they have self-employment income.

An excellent educational option for people looking into a rewarding career can be found in the designation programs offered by Knowledge Bureau, which is a designated educational institute recognized as such by CRA and Human Resources and Skills Development Canada.  For more information call 1-866-953-4769.

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