Employment insurance (EI) is a taxable benefit designed by the Canadian government to support people while searching for a new job. Although it is a temporary relief fund, it is taxable.
Nonetheless, many people benefit from this initiative as it assists them when there is a halt in their earnings even self-employed individuals. However, you can only receive EI benefits if you have paid premiums in the past year. In addition, you must meet the EI benefit qualifying and entitlement conditions
So, once you receive the EI benefit, Service Canada will issue you a T4E– Statement of Employment Insurance and Other Benefits tax slip. But do you have to repay EI benefits?
EI Repayment in Canada
Yes, you have to repay the EI benefit you received depending on your annual income for the year while filing your tax return. However, the amount or percentage the CRA expect you to repay is indicated on Box 7 of your T4E slip.
So, if your annual net income for the year 2021 is above CA $70,375, you must repay 30% of your annual income in excess of CA $70,375 or 30% of the cumulative benefits you received in the tax year. You can pay whichever is less.
Note that you should inform Service Canada of the earnings you start receiving after getting EI benefits. Nonetheless, only earnings have to be repaid, hence, any funds that do not fall under earnings does not have to be repaid.
EI Repayment Exemptions
Once your termination pay is agreed on, you must notify Service Canada. It is the job of Service Canada to then issue you with a Notice of Debt certificate for the amount that they expect you to repay.
In addition, you are to give your employer the notice, who will, in turn, make the payment directly to the Receiver General. Note that if there are any outstanding amounts, you will have to bear the cost.
However, there are exemptions. Below are some categories of people that are exempted from repaying EI benefits:
- If you have an annual income of less than CA$ $70,375 in 2021
- In the past ten years, you got less than a week’s benefits
- If you received any special benefits like maternity, parental or caregiving benefits
- The EI benefit you got overlap in two calendar years
The usefulness of EI in Canada cannot be undervalued as it serves as a temporary earning for people who need it. However, as mentioned above, you have to return this fund as at when due.
Hence, it is advisable to file your EI benefit claim as soon as you become unemployed. By doing this, the processing of your claim by Service Canada will be swift as possible.
Also, you will not lose any benefits you are eligible to if you file in early. In addition, you must be aware and prepare your finances towards repaying any amount you receive from termination. Nonetheless, if you have any questions or confusion about how to go about repayment, you can contact Service Canada.