ch.3: employment deductions and credits

Question 1

CPP: Canada Pension Plan

Answer 1

earnings related social insurance program to protect against income loss due to retirement, disability, death

all of CDA except QC (QPP)

Question 2

CPP financed through

Answer 2

contributions from:
- employees
- employers
-self employed TP’s

Question 3

CPP max pensionable earnings

Answer 3

TP’s earnings up to a max are called max pen. earn.

reduced by basic exemption, diff is subject to contributions

Question 4

CPP base vs enhanced

Answer 4

base contribution 4.95%

enhanced contribution 1%

total 5.95%

+ employer cont. (equal amt)

= 11.9% total

Question 5

2023 CPP LIMITS

Answer 5

• Maximum pensionable earnings: $66,600;

-Basic exemption: $3,500;

• Maximum earn. subject to cont: $63,100 (calculated as max pen - basic exempt.)

-Max req base cont: $3,123.45 (calculated as max pen earn. x 4.95%); and:

• Max req enhanced cont: $631 (calculated as $63,100 x 1%).

Question 6

max CPP cont box 16 of T4

Answer 6

$3754.45

max req base cont $3123.45 + max req enhanced cont. $631

must calculate seperately bc only total incl in box 16

Question 7

CPP cont. tax treatment

Answer 7

• enhanced cont: deduction in step 3
• base cont: fed. non-refundable tax cr in step 5 part B

calculate seperately

Question 8

Tax deduction vs tax credit

Answer 8

Deduction: directly subtracted from INCOME (step 3+4)

Credit: directly subtracted from TAX OWING

Question 9

CPP boxes

Answer 9

box 16: amt withheld for CPP cont.

box 26: amt of pen. earn. for CPP

box 28: tick if none of emplpyee earnings shown in box 14 pensionable

Question 10

CPP exempt earnings

Answer 10

box 26 and 14 usually the same unless earnings exempt

exempt:
- casual employment
-direct tips
-specified types of employment

Question 11

CPP: how to elect additional CPP cont.

Answer 11

form CPT20: Election to pay CPP contributions

total contribution added directly to amount owing on tax return

election only available for certain types of income that CPP not withheld (i.e tips)

calculated in pt5 of sch.8 OR form RC381, on line 31000

Question 12

FORM CPT20

Answer 12

form to elect to pay additional CPP

total contribution added directly to amount owing on tax return

election only available for certain types of income that CPP not withheld (i.e tips)

calculated in pt5 of sch.8 OR form RC381, on line 31000

Question 13

who contributes to CPP

Answer 13

Deducted from an employee’s earnings if that employee is:
-18 to 70 years of age;
-Has pensionable employment during the year; and
- Not considered to be disabled under CPP/QPP and receiving CPP/QPP disability benefits.

Question 14

who contributes to CPP - EXCEPTION

Answer 14

TP age 65 to 70 receiving a CPP/QPP retirement pension
+
completed Form CPT30 Election to Stop Contributing to the Canada Pension, or Revocation of a Prior Election

Question 15

CPT20 VS CPT30

Answer 15

CPT 20: form to elect to pay additional CPP

CPT 30: Election to STOP Contributing to the Canada Pension, or Revocation of a Prior Election

Question 16

T4 CPP BOXES

Answer 16

BOX 16: gross earnings

BOX 26: pensionable earnings ( often smae as box 16)

BOX 28: checked if non of employee earnings pensionable (box 16+26 black)

Question 17

CPP underpayment

Answer 17

• when TP works for multiple employers
• no adjustment req on tax return
• TP does not need to make up the diff. BUT can elect to make additional w form CPT20

Question 18

CPP overpayment

Answer 18

• TP works for multiple employers, total earnings more than max pen. earnings
• REPORTED ON TAX RETURN, refunded to TP

Question 19

CPP underpmt VS overpmt

Answer 19

under pmt: NOT reported on tax return, not req to make up diff

over pmt: reported on tax return, may be refunded

Question 20

CPP proration

Answer 20

when TP contribution period less than full year, have to prorate max pen. earnings + basic exemption

Question 21

Prorate CPP when TP:

Answer 21

• Turns 18 during year
• Draws disability benefits for part of yr
• btwn 65-70 yrs old, receiving CPP retirement ben, has elected tp stop w CPT30
• Turns 70 during year
• Dies before december

Question 22

to prorate CPP

Answer 22

max pen. earn OR basic exempt.
DIVIDE by 12
MULTIPLY by # months of cont period

Question 23

months in cont period determined by:

Answer 23

fill in later

Question 24

form RC381

Answer 24

inter provincial calclation for CPP and QPP contributions and over pmts

this form required if TP lived in both QC and another prov in same year

Question 25

step 5

Answer 25

PART A: fed tax on taxable income

PART B: fed non- refundable tax cr

PART C: net fed tax–chap 5

Question 26

exployment ins premiums

Answer 26

to repalce part of earnings during unemployment

financed by employEE and emplpyER

no min/max age, no proration req, no basic exemption

box 18 of T4

Question 27

EI premium calculation

Answer 27

insurable earnings(box 24) X EI rate (1.63% 2023)

if under pmt: emplyee not req to make up diff

over pmt: refundable credit – calculate on T2204