EI benefits can be a real headache come tax time
The number of EI recipients has fallen sharply over the past year, especially for men. In the span of a year, the number of Canadian men receiving EI benefits dropped by 13.4 per cent, while the number of women decreased by just 6.9 per cent.
But with tax season on hand, some of these folks may be surprised to discover that they owe taxes on those EI benefits, a particular headache for those who were lucky enough to find a decent job sometime late last year.
Here’s what to watch out for as the deadline approaches.
The bad news is that if you do get back to work and your net income works out to more than $52,250, you may be required to pay back a portion of the benefits you received. Happily, maternity, parental and sickness benefits don’t count towards this total.
What the potential damage? Here’s a calculator that can help you figure out how much you might end up owing.
If you dipped into RRSP savings to help pay some bills while looking for work, you may have a different problem though.
In this instance, the withholding tax rate depends on how much you actually withdraw, not your tax bracket. For amounts up to $5,000, the rate is 10% (21% in Quebec); from $5,001 to 15,000, it’s 20% (26% in Quebec); and on amounts over $15,000, it’s 30% (31% in Quebec).
Often people try to minimize withholding tax, thinking that will be their total tax bill — only to come up short later with additional taxes owing and little income.
Have you had to settle up unexpectedly after a period of unemployment? How did things work out?
By Gordon Powers, MSN Money
* Follow Gordon on Twitter here.
Posted by: bob | Apr 7, 2021 6:59:34 AM
i had to pay back 30% of the EI i had received in the year i was unemployed when tax time came around. oh well!
Posted by: Birds | Apr 7, 2021 7:43:15 AM
I have often wondered about how efficient tax collection is not a priority considering the cost of redoing many layers of paperwork for one individual because it is never done right the first time. I love how the responsibility for making the decisions regarding proper deductions are left to the one person who likely knows the least about what is required transferring not only the responsibility but the blame for doing it wrong. Hey, this way the inefficient, expensive over sized tax department can continue to justify it's growing inefficient glutenous demand for money without having to admit it's massive redundancies which only serve to cost taxpayer more, much more in the end.
I also had to pay extra the one time I collected EI and it was because there were no employees in the entire office where I filed that understood how to deduct properly. Oh well, what purpose does it serve to suggest that the problem stems from the government hiring individuals unprepared to do their job because really if we get an answer from them at all it would simply be 'Give me more money and I will have my staff trained'. Yeah, yeah....
Posted by: Chip | Apr 7, 2021 10:33:47 PM
Wow... and imagine the headache if ya actually had to work for that cheque which comes in every month... and still get money taken off... plus having to get up in the morning to go to work, plus transportation costs, plus clothing costs, plus that silly EI they deduct and ya never get back even if you never use it during your career. I paid over 50K during the years I worked... never claimed 1 cent... and did I get any of it back ?
Posted by: wassssup | Apr 7, 2021 10:43:04 PM
"I paid over 50K during the years I worked... never claimed 1 cent... and did I get any of it back ?"
Of course not. If you pay house insurance for for 30 years and then sell the house, you don't get your money back. EI is the same idea.
Posted by: Chip | Apr 7, 2021 11:21:23 PM
@wassssup Hey... I completely agree with ya. My point is if people want to complain about being taxed on EI benefits, at least they're getting a % back of what they put in. And believe me... we are very aware of the number of people who double dip while on EI or the chronic ones who work for 1-2 years, collect EI for a year... work 1-2 years... collect EI for another year. Or those who collect EI and then go off on "stress" leave 3-4 times in their career. That's called systemic abuse.
Posted by: Jason | Apr 8, 2021 9:53:48 AM
Systemic abuse of the blog I wonder who!Does he have a Chip on his shoulder.
Posted by: melonhead | Apr 9, 2021 5:34:02 PM
Hey that is just stupid, because most of those who are on pogey(ei) are they through no fault of their own. First it should not be calculated in the yearly tax bracket. It should be a separate income. So even if you are lucky enough and get a well paying job, the ei should count on a different level and the regular income on a different level. 55% of the wages is a slap across the face to the workers of this country. Imagine 55% of min. wage. go figure
Posted by: Pat Bastien | Apr 9, 2021 9:20:21 PM
The problem with EI is that it should be like any other insurance the rates that one should pay are based one the industy you work in thus the cost would reflect how likely you would get laid off. The way it works now it is just tax to support industries that lay off more than others.
Posted by: Bobby | Apr 9, 2021 9:40:34 PM
Excellent comment Birds...this is why a flat tax makes sense, I did a paper on it. Some believe that the cost to run our tax system runs into the tens of billions (cra staff, forms, more forms, lawyers, time for completion, time for corrections, etc, etc).
Not only would a flat tax be extremely efficient, it would save the gov't (and hopefully we get a piece) billions!!
Posted by: Bobby | Apr 9, 2021 9:43:04 PM
People never realize the benefits of EI...the max ones pays into the system is approximately $654 (discounted by 15%, remember you get a tax credit) for the entire year. Get laid off, one can collect $457 PER WEEK! If approved for 40 weeks, you get $18, 280 but paid $654 for it. Its the seaonal people that kill the system.
Posted by: Bobby | Apr 9, 2021 9:48:37 PM
Hey Mellonhead, you are not making sense..so who's fault is it if you get laid off...mine? I'm paying into the system too remember. You truly don't make sense, if you want 100% protection, you better pay into the sytem a heck of alot more or get a good education or start your own business. I would like to see individual accounts, pay into the system and there it is for you but just the money you paid into it...not my portion my friend, cuz that would be for me should I ever need it.
I see people use EI many, many times. Based on current rates, they will never pay back into the system what they got...remember, we are not talking about taxes but EI premiums.
Posted by: Ted C | Apr 11, 2021 11:52:31 AM
I got EI for the first time after our plant closed - me a 30 yr employee - got taxed at source from EI so I dont get it the tax complaints if you didnt - and after paying for almost 40 yrs into the thing i got exactly 6 months before my file was "closed" and I got cut off. Been living on savings ever since. To me, if you pay in for over 30 years (esp at max as I did), you should get your full entitlement (43 weeks in my case and cut off after 26), otherwise, it really isnt like insurance premiums is it?
Posted by: Alisha | Sep 1, 2021 12:04:13 PM
I went to school full time and when on EI
after 9 months they cut me off while i was still in school so i had to take out a line of credit
when I was done school I got 2 jobs (working around 68 hours a week) ! to help pay back the money i owed for school and my line of credit !
so when tax time came around they said i made to much money and I owed ei over a grand ......THANKS!!!!! does this make sense ?
Posted by: Brad | Jan 22, 2022 10:02:39 PM
Do you pay 100% of your ei you collected if you made over a certain amount in the year.