Are You Overpaying CPP and EI?

Tax Tips – CPP and EI

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Some of you may have noticed slightly larger paycheques at the year end. It occurs due to the payout completion towards your CPP and EI deductions for that year.

Canada Pension Plan Contributions
CPP is an earnings-related social insurance program designed to protect contributors and their families against loss of income due to retirement, disability or death. It is a good practice to check your T4 slip every 2/3 years to find out if you are paying more than you require. Overpayments can be reported on the tax return and may be refunded to the contributor. This is accomplished by claiming the excess amount as a refundable credit on line 448 of the T1. Here  is the calculation to check:

For 2008 if your income is $44,900 or more – your maximum required contribution is $2,049.30, meaning regardless how much you make above $44,900, CPP will be $2,049.30.

If you make less than $44,900 – follow these steps.
A. Subtract $3,500 from your income.
B. Multiply A by 4.95% to get your CPP.
CPP is usually shown in box 16 of T4 slip.

Employment Insurance Premiums
The purpose of EI is to replace part of the earnings lost by a person during a period of unemployment. It is a good practice to check your T4 slip every 2/3 years to find out if you are paying more than you require. Overpayments can be reported on the tax return and may be refunded to the contributor. This is accomplished by claiming the excess amount as a refundable credit on line 450 of the T1. Here is the calculation to check:

For 2008 if your income is $41,100 or more – your maximum required contribution is $711.03, meaning regardless how much you make above $41,100, EI will be $711.03.

If you make less than $41,100 – just multiply your income by 1.73% to get your EI.
EI is usually shown in box 18 of T4 slip