divided by 12. So if you turn 70 in July, and have total self-employment earnings of $24,000 in the year and no employment income, your pensionable earnings will be 7/12 x $24,000, or $14,000. You then deduct the basic exemption of $3,500 x 7/12, or $2,042, for total earnings subject to contribution of $21,958. The Tax Calculators will automatically calculate the pensionable amount for those turning 18 or 70 in the year, based on the birth month. When the user inputs a number of months for which they have elected to not contribute, that will be used to calculate the pensionable self-employment earnings, for taxpayers who are 65 to 70. The number of months elected cannot exceed the number of months collecting CPP retirement pension.
The rules for employers in Québec, who must deduct Québec Pension Plan (QPP) contributions instead of CPP contributions, are generally the same as for other provinces, except that QPP contributions must be withheld from employees even if the employee is 70 or over.
When executor, liquidator, or administrator fees are being paid out of an estate, the estate must register as an employer with Canada Revenue Agency (CRA). This is the responsibility of the executor. All applicable income tax and Canada Pension Plan contributions must be withheld from the payment, but employment insurance premiums do not apply. This only applies if the executor, liquidator, or administrator does not act in this capacity in the regular course of business.
There are some types of employment payments and other payments from which CPP or QPP contributions do not have to be deducted. CRA information on what type of payments are and are not subject to CPP, EI or tax deductions:
Also, if a person has more than one employer in the year and earns total employment income which is less than the maximum pensionable earnings, this will have the result that the basic exemption used to withhold CPP or QPP contributions is more than $3,500. There is no obligation to remit the shortfall in contributions, but if desired, this can be done, as described in the following paragraph.
A person can elect to pay Canada Pension Plan contributions on certain types of income from which CPP contributions have not been deducted. This can be done by an election using form CPT20 if the person is:
CRA also has a section titled CPP/EI Explained, which talks about different types of earnings and how they are treated for CPP and EI purposes. It includes information on
Revenu Québec information re employment not subject to QPP:
When a person has both employment and self-employment earnings, the total CPP or QPP contribution paid will be based on total employment plus self-employment earnings. See the following example of the calculation, for 2012, as it would be calculated on Schedule 8 of the personal tax return.
|Pensionable net self-employment earnings (zero if a loss)||$20,000|
|Employment earnings not shown on a T4 slip on which you elect to pay additional CPP contributions||nil|
|Subtotal (zero if negative)||$20,000|
|Pensionable employment earnings from T4||30,000|
|Total pensionable earnings (max $50,100)||$50,000|
|Less basic exemption||-3,500|
|Earnings subject to contribution (maximum $50,000 - 3,500 = $46,500)||$46,500|
|CPP contributions @9.9%||4,603.50|
|Less contributions paid through employment (from T4)||
|Contributions payable on self-employment and other earnings (zero if negative)||$1,980.00|
The taxpayer would have to remit $1,980.00 of CPP contributions along with taxes payable.
When the tax return is filed, a non-refundable tax credit is calculated based on CPP contributions paid. The non-refundable tax credit would be allowed based on
The other 50% of CPP on self-employment earnings, or $990, is allowed as a deduction from income. This deduction is the employer portion of the CPP contribution.
When self-employment earnings are a loss, they are not included in the CPP calculation.
Revised: May 01, 2015
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